For a workshop, a truck fleet or a land-rich company, goodwill is often the smaller part of the value. This approach starts with what the machinery, vehicles and property would sell for today, then takes off the debts secured against them.
Under the asset approach, a Newcastle business is worth what its assets would fetch at today's prices once every debt is paid. Each item on the balance sheet is restated from book value to market value. The approach leads for plant-heavy or low-margin operators, holding companies and businesses being wound up, and sets the floor for every other result.
Each asset and liability is moved from book value to market value: land and buildings, plant and vehicles, stock, debtors, contingent liabilities and the tax that would be payable on any gain. Most of the work sits in the gap between the two figures. A CNC machine at a Beresfield workshop that was written off years ago can still fetch a real price, while a tipper truck bought on finance last year may be worth less than the loan against it.
The tangible assets are valued first, and whatever the business earns above a fair return on those assets is capitalised to give goodwill. The method links asset and earnings reasoning, but it is sensitive: a small shift in the assumed fair return moves goodwill a long way, so every assumption is written into the report.
A business that keeps trading should never be worth less than its assets would raise, so adjusted net assets are calculated on every engagement whether or not they lead. If the earnings result comes in lower, the report says so directly, because it usually means the capital in the business is under-earning and a buyer would prefer the assets to the business. In a shareholder dispute before the Supreme Court of New South Wales, that comparison is one of the first things an opposing expert tests.
Take an illustrative steel fabricator at Beresfield supplying mining, port and defence work. Its asset register carries a press brake, a plasma cutting table and a beam drilling line at a fraction of their resale value, and the factory, owned by the same company, has sat at its purchase price for years. A specialist plant and machinery valuation replaces the book figures, the property is valued on sales of comparable industrial sites nearby, and equipment loans, chattel mortgages and balloon payments are deducted in full on the way from enterprise value to equity value. If the factory stays in the company and the shares are sold, the valuer flags that landholder duty under the Duties Act 1997 (NSW), administered by Revenue NSW, is a structuring question for the accountant rather than an adjustment to the asset values.
A haulage business running from a depot at Tomago, delivering equipment and supplies to Upper Hunter mines and moving freight to and from the Port of Newcastle, raises the same questions in another form: prime movers and trailers at what the used truck market would pay rather than their written down value, the depot lease or freehold, and finance against almost every vehicle. Its contracts are then tested under the income approach, including how long the mine-linked work has left to run, to see whether they support goodwill above what the fleet would fetch on its own.
Plant-heavy or low-margin businesses: fabricators and engineering workshops at Beresfield, Tomago and Mayfield, wine and food producers in the Hunter Valley, freight and warehousing operators serving the Port of Newcastle, earthmoving and mining services contractors in the Upper Hunter, and civil contractors, together with property holding companies and any business being wound up.
The income approach still tests each of these to see whether earnings justify a value above net assets, and sale evidence is used wherever it can be found. The report then says why the asset figure led, or what displaced it.