Tangible asset valuation implications during economic uncertainty

Tangible assets can contribute significantly to an organisation’s value, performance and strategic direction. As we continue to witness COVID-19’s economic impacts ripple through the world – with Australia in its first recession in decades – having accurate and reliable asset values, along with the proper disclosure of these, is now more crucial than ever for businesses.

What is a tangible asset valuation?

The valuation of tangible assets is the process of assessment, evaluation and calculation of a company's physical assets to determine the value for accounting compliance, insurance, legal, financial, regulatory or transactional purposes. Land and buildings, plant and equipment, infrastructure, contents, mobile equipment/yellow goods are all examples of tangible assets that require valuations for varying purposes.

Why are tangible asset valuations important, particularly during economic uncertainty?

Tangible asset valuations are often utilised to assist organisations with their financial reporting, asset management, strategic, fiscal and legislative requirements, including in times of significant change.

The associated economic downturn as a result of the pandemic will likely place many companies in financial distress and uncertainty and lead to increased requirements regarding the accurate disclosure of asset values. During times of change and uncertainty, it is imperative that a company’s tangible assets values are correctly identified. Significant change within the business can lead to the requirement of valuations for numerous purposes including legal, accounting, regulatory, financial or transactional requirements.

In this latest report, Marsh’s tangible assets valuation specialists examine how valuation can play a key role in each phase of the restructuring and turnaround lifecycle, including:

Phase 1: Financial Distress 

• Impairment testing
• Financial reporting – including materiality 
• Exchange rate impacts
• Strategic decision-making
• Mergers, acquisitions and disposals – including purchase price allocation, tax consolidation, pre-valuation assessment

Phase 2: During Administration or Receivership

Phase 3: Emerging From Distress

• Asset register reconciliations and review
• Valuations for insurance purposes
• Tax depreciation schedule
   

Download the full report here. 

LCPA: 20/594