Business Valuation Report: Australian Guide | IBV™

A business valuation report is a documented explanation of value for a specified business, asset or ownership interest at a particular date. The conclusion matters, but it is only useful when you can follow the instructions, evidence, assumptions and analysis that produced it. Two reports can display the same dollar figure and still answer very different questions.

This guide is for Australian owners and advisers reviewing a draft, commissioning a report or deciding whether an existing report fits a new decision. It is not a downloadable valuation or an opinion about your business. The fictional figures below illustrate how to read a reconciliation; they are not industry benchmarks or a suggested multiple for your circumstances.

Begin with the engagement letter, then read the executive summary. Check that they describe the same purpose, subject, valuation date and intended users. If a report values operating assets but your decision concerns shares, the missing bridge may be more important than the headline conclusion.

The ATO's market valuation guidance emphasises relevant, reliable evidence and the circumstances at the valuation date. The International Valuation Standards Council provides a framework covering scope, bases of value, approaches and reporting. These are useful reference points, not a promise that every report is acceptable for every recipient.

Use the following reading checklist before moving to the financial pages. Missing information should prompt a question, not an assumption.

For example, a valuation prepared for an owner's internal planning does not automatically authorise a lender, buyer or another shareholder to rely on it. A report dated October may value the business at an earlier June date. That distinction affects which trading results, contracts and other information properly inform the assessment.

Match the report to the decision—not just the business name. Before reusing an existing report, ask whether its subject, date, purpose and authorised users still fit. Sharing a PDF does not itself extend reliance.

A retrospective valuation requires particular care. Later information may illuminate conditions already present at the relevant date, but it should not silently introduce knowledge that was unavailable or not reasonably foreseeable then. Ask the valuer to distinguish those situations and explain the evidence relied on.

APES 225, revised October 2024, distinguishes valuation engagements, limited-scope valuation engagements and calculation engagements. APES GN 20, revised January 2025 provides further guidance. IBV voluntarily aligns its valuation process and reporting with the relevant principles of APES 225. The standard applies to members of the professional accounting bodies to whom it applies; IBV is not subject to it through professional-body membership. This does not represent membership of a professional accounting body or APESB accreditation. The October 2024 revision became effective on 1 January 2025.

A calculation engagement uses approaches, methods and procedures agreed with the client. Its agreed limits matter when judging the result's suitability. A limited-scope valuation engagement involves limitations or restrictions on the work compared with a valuation engagement; that does not mean an unsupported answer or lower professional care is acceptable. Read which work was restricted, why, and what that means for the conclusion.

Under APES 225 terminology, which IBV voluntarily uses, a calculation engagement produces a Calculated Value, while a valuation engagement or limited-scope valuation engagement produces a Conclusion of Value. Both can be communicated in a valuation report; report length or presentation does not determine the engagement type.

IBV describes its offerings as Calculated Valuation, Limited Scope Valuation and Full Conclusion Valuation. These commercial labels should be read alongside the engagement letter's actual scope. A Limited Scope conclusion can be robust, detailed, evidence-based and defensible within its disclosed boundaries. A longer document does not, by itself, establish a better answer.

A limited-scope engagement does not reduce the requirement for professional care. However, restrictions on procedures or evidence may affect the conclusion and its suitability for the intended purpose. A more extensive valuation engagement may produce a different result, not necessarily just a narrower range around the same figure. APES GN 20 explains that limited-scope engagements generally obtain less evidence on some significant matters. As part of the standard with which IBV voluntarily aligns, the applicable reporting disclosures in paragraphs 5.2(p) and 5.2(q) of APES 225 acknowledge that a valuation engagement might have produced different results.

As an IBV service policy, shareholder changes, restructures, ATO/tax matters and IBV's advisory family-law work require at least a Limited Scope Conclusion of Value. The appropriate scope and permitted reliance are confirmed before engagement. This service policy is not a universal minimum imposed by APES 225, with which IBV voluntarily aligns; APES GN 20's engagement-selection guidance is not prescriptive for every circumstance. Family-law work is for non-litigious separation negotiations, voluntary mediation and settlement planning; IBV does not provide expert-witness or court-appointed valuations. See the engagement comparison rather than assuming the shortest report suits an external decision.

The financial analysis should connect to source accounts, not simply introduce an unexplained adjusted profit. Look for the years reviewed, current trading evidence, accounting basis and reconciliation of material differences. Normalised earnings should show both increases and decreases, supported by records and commercial reasoning.

Owner remuneration is a useful test. If the owner's necessary work would cost more to replace than the expense currently recorded, maintainable earnings may fall. Drawings, dividends and loan withdrawals that did not reduce accounting profit cannot simply be added back. Related-party rent, management fees and exceptional receipts need the same discipline: explain the ongoing economic cost, not just the relationship between payer and recipient.

Ask how the selected earnings measure aligns with the valuation method. EBITDA, EBIT and cash flow are not interchangeable. Lease accounting can change reported EBITDA without removing the underlying lease obligation. Replacement capital expenditure and working capital may matter even where they do not appear as expenses in an EBITDA calculation.

Every material adjustment needs a reason and a record. A schedule that only removes expenses can overstate sustainable earnings. Ask what a replacement owner would still have to pay, and whether that cost is retained elsewhere in the analysis.

Read the EBITDA guide if you want to work through the build from the accounts. In a report, the question is then why the selected earnings level is sustainable: customer retention, capacity, contracts, owner dependency and recent trading should support the choice of period or weighting. Averaging three years is not automatically the correct answer.

A report should explain why the approach and method suit the business and the evidence available. An earnings capitalisation method may be suitable for an established profitable operation. Discounted cash flow requires supportable forecasts and assumptions. Asset-based and market approaches can be relevant in other circumstances. There is no universal method that wins because its name sounds more sophisticated.

Where a multiple is used, check its source and definition. Is the evidence from completed transactions or asking prices? Are the prices enterprise or equity values? Are the earnings before or after rent, owner replacement costs and lease adjustments? Differences in scale, growth, concentration and transferability need explanation before another business's multiple can inform yours.

Risk analysis should connect with the conclusion. Naming customer concentration in a SWOT without explaining its valuation implications is incomplete. A major contract expiring soon, an owner who controls every relationship or an insecure premises arrangement may affect earnings, risk or both. Ask how the valuer avoided reflecting the same risk twice through an earnings reduction and a multiple adjustment.

If different methods produce different indications, the report should explain the reconciliation. A simple average may obscure why one method has stronger evidence. Likewise, a range should communicate uncertainty and assumptions, not hide an absence of reasoning. The useful question is: which evidence made the valuer prefer this conclusion?

Assume a fictional Australian company is assessed as a going concern at 30 June. All figures are invented. Its operating enterprise value is $1,200,000; that value assumes the agreed normal level of working capital and the operating equipment needed to generate the assessed earnings. The following simplified bridge defines which other balances are included.

The bridge assumes the investment is not already reflected in operating earnings or enterprise value. The shareholder loan remains a separate creditor claim: it is deducted to reach equity value and is not silently treated as part of the shares. Whether it is repaid, assigned, forgiven or retained requires separate transaction and adviser review.

The $30,000 adjustment assumes working capital is below the level already required by the operating-value definition. If that shortfall was already reflected elsewhere, deducting it again would double count. Similarly, the operating equipment is not added to the earnings-based value simply because it appears in the asset register. Lease obligations, tax liabilities and other debt-like items need case-specific treatment consistent with the method; this simplified example does not resolve them.

An operating value is not automatically the owner's cheque. First identify cash, debt, working capital, excluded assets and the interest being transferred. Then separate valuation from negotiated price, completion adjustments, transaction costs and tax.

A 25% arithmetic allocation of $1,000,000 is $250,000, but that is not automatically a concluded value for a 25% holding. Voting rights, distribution rights, transfer restrictions, control and the applicable basis of value can matter. A report on a particular holding should explain the rights and any adjustment rather than multiplying an enterprise headline by the share percentage.

IBV's report presentation has three parts. These are IBV's presentation choices, not a three-part format prescribed by IVS, which specifies reporting requirements rather than these section titles. Read them as a connected evidence trail, not three independent selling points. The agreed engagement determines the work and any disclosed limitations; a table of contents alone does not establish that a report fits your intended use.

Depending on the agreed scope, the Evidence Pack may include source schedules, financial information, RAVDA findings, benchmarking reports and other supporting analysis. Not every listed item is included in every engagement.

RAVDA means Risk and Value Driver Assessment. It records structured business-risk and value-driver information; director or shareholder responses still need to be assessed against other evidence. The SWOT and Top Performers Report provide industry-benchmarking context, not a guarantee that every benchmark is directly comparable or that a particular multiple follows automatically.

Check that important schedules can be traced from the detailed analysis to the source records. Industry context adds value when its relevance is explained. It should not replace business-specific evidence about customers, people, contracts and financial performance. No actual client report or client financial details are reproduced in this guide.

Draft review is a chance to correct facts and test reasoning, not negotiate the opinion toward a preferred number. Give the valuer the document supporting a correction and explain the affected period. A signed lease, employment contract or reconciled ledger is more useful than a statement that the business deserves a higher multiple.

• Which entity, assets or ownership rights does this conclusion cover?
• Which material records were unavailable or accepted without independent verification?
• Why was this earnings period, weighting or forecast preferred?
• Where are replacement management, rent, leases and working capital treated?
• How do the main risks affect the earnings, method or conclusion?
• Which assumption has the greatest effect, and what plausible change would move the answer?
• Who may rely on the final report, and does the intended recipient require anything further?

If a correction is rejected, ask for the reason. It may concern reliability, timing, the valuation basis or an expense that continues under new ownership. Keep the final report, engagement letter and supporting material together. Preserve the draft history where it helps explain a factual correction, while clearly identifying which version is final.

A valuation is not an audit of every source record, a guarantee of sale price, a tax eligibility certificate or approval from a lender or the ATO. The ATO's market valuation of assets page describes evidence and reporting expectations; individual provisions and circumstances still require appropriate tax advice.

Read assumptions and limitations before forwarding the conclusion. A restriction on customer verification, reliance on management forecasts or a specialist asset opinion can materially shape what the valuation establishes. Necessary qualifications are not automatically a defect, but disclosure alone does not make an inadequately supported conclusion reliable. Where a material limitation prevents a supportable conclusion for the intended use, the scope may need to change or the conclusion may need to be withheld. Within the framework with which IBV voluntarily aligns, APES 225 paragraph 4.6 addresses sufficient and appropriate evidence, with its extent assessed according to the service and intended use. Ask whether missing evidence can be obtained and whether it would change the scope or conclusion.

There is no universal expiry period for every business valuation report. A report remains an assessment at its stated date, but a new decision may require an update after material changes in trading, debt, contracts, ownership or market conditions. Confirm with the valuer and intended recipient rather than assuming that a report less than twelve months old is current enough.

Before commissioning work, identify the decision, relevant date, subject and recipient. IBV can then confirm the appropriate engagement and reporting boundaries. The objective is not the largest document or the most favourable number: it is a conclusion whose reasoning can be examined and whose use is clearly understood.

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