Financial Reporting Valuations
Private companies preparing financial statements often need independent valuation support to meet accounting, audit and regulatory requirements. Financial reporting valuations must comply with accounting standards and apply appropriate valuation methodologies. Importantly, they must also be clear, consistent, and defensible under audit review.
At Lotus Amity we prepare financial reporting valuations for private companies. We provide fair value and purchase price allocation reports in accordance AASB 2, AASB 3, AASB 9 and AASB 138.
Our financial reporting valuations are prepared with audit reliance in mind. We structure our work to support auditor review under ASA 540 and ASA 620, with clear documentation of basis, assumptions, inputs, and professional judgement.
Reports are comprehensive and fully supported to meet the Australian Accounting Standard and auditing requirements
- AASB 2 Share based payments – Accounting standard AASB 2 specifies the financial reporting required when an entity undertakes a share-based payment transaction, such as the issue of options.
- AASB 3 Business Combinations – Accounting standard AASB 3 sets out the financial reporting requirements for an entity undertaking a business combination. Under the standard identifiable assets and liabilities assumed are to be recognised and valued, including intangible assets.
- AASB 138 Intangible Assets – Accounting standard AASB 138 requires that an intangible asset must be identifiable to distinguish it from goodwill.
Common reasons companies engage us include:
- annual or interim financial reporting
- impairment testing and recoverable amount assessments
- purchase price allocations following acquisitions
- fair value measurement of assets and liabilities
- restructure, recapitalisation, or business model changes
Case studies
The following case studies illustrate the valuation services we provide for financial reporting purposes:
- Purchase Price Allocation report in relation to a superannuation business acquisition. Lotus Amity carried out an analysis of the transaction, service and strategic agreements, forecasts, member, revenue and profitability growth, expected acquisition cost savings, contracts acquired, cash and deferred consideration. Lotus Amity valued the investment and promoter agreements, the brand, goodwill, assembled workforce and consideration in compliance with IVS 210, AASB 3 and AASB 138 and adopted an Excess Earnings Method, Relief-from-Royalty Method and Replacement Cost Method.
- Valuation of loan notes held in a renewable electricity supplier. Lotus Amity analysed the issuers operations, loan note terms, guarantors, debt service and repayment risk, security, subscription and pricing, financial covenants, quarterly performance, budget and forecast, cash and assets values, risk-free rates and market yield spreads.
- Valuation of the fair value of employee Zero Exercise Price Options together with the expected number to vest, in accordance with AASB 2. Lotus Amity analysed the invitations to participate and long-term incentive plan rules, treatment of options for leavers, vesting dates and conditions, the intrinsic option values, volatility and expiration, risk-free rate, dividend distribution, exercise dates and dividend yield.
Frequently Asked Questions – Financial Reporting Valuations
Do we need an independent valuer for our financial statements?
In many cases, yes. Companies often engage an independent valuer where accounting standards require fair value measurements, impairment testing, or complex assumptions. An independent valuation also helps management demonstrate objectivity and supports audit review.
Will your valuations stand up to audit scrutiny?
Yes. We prepare financial reporting valuations with audit reliance in mind. Our work aligns with applicable accounting standards and the International Valuation Standards, and we document assumptions, methodologies and judgement clearly so auditors can review and challenge our conclusions efficiently.
What accounting standards do your financial reporting valuations align with?
We prepare valuations in accordance with relevant accounting standards, including AASB requirements. Where fair value measurements apply, we align valuation approaches, inputs and documentation to those standards and the intended financial reporting purpose.
How do you work with auditors during the financial reporting process?
We engage with audit teams as part of financial reporting engagements. Where appropriate, we explain our methodologies, assumptions and conclusions directly to auditors and respond to audit queries in a clear and timely manner.
What types of assets do you value for financial reporting purposes?
We value a wide range of assets and interests for financial reporting, including businesses, intangible assets, and financial instruments. Importantly, we consider completeness carefully, particularly where multiple intangible assets may contribute to value.
How do you approach judgement and assumptions in valuations?
We apply professional judgement based on market evidence and recognised valuation approaches. In addition, we document significant assumptions and explain why they are appropriate for the financial reporting context. This approach helps management and auditors assess reasonableness in context.
Can you support impairment testing and recoverable amount assessments?
Yes. Companies engage us to support annual or interim impairment testing. We assist with value‑in‑use and fair value assessments and ensure assumptions remain consistent with business plans, market conditions and accounting requirements.
When in the reporting process should we involve a valuer?
Early engagement improves outcomes. Involving a valuer before reporting deadlines allows time to confirm scope, align with audit expectations, and address judgement areas without unnecessary time pressure at year‑end.
How do financial reporting valuations differ from transaction valuations?
Financial reporting valuations focus on compliance, consistency and auditability rather than negotiation outcomes. While transaction context informs market evidence, financial reporting valuations must align strictly with accounting standards and stated premises of value.
How can we discuss whether a valuation is required?
We are happy to discuss your reporting requirements, timing and audit considerations before any engagement. An initial conversation often helps clarify scope and determine whether independent valuation support is appropriate
Click here for details on how to appoint an expert for audit purposes and how the International Valuation Standards assist in meeting the Australian Audit Standards.