HKFRS 13 · Hong Kong
Business valuation in Hong Kong
An independent opinion of what a company, a shareholding or a business unit is worth at a given date — evidenced to a standard your auditor, counterparty or the court will accept.
When a Hong Kong company needs a business valuation
Most engagements start because someone external has asked for a number that can be defended. In practice that means one of these situations:
- Financial reporting. An auditor requires support for a fair value under HKFRS 13 — an investment in an unlisted entity, an impairment assessment, or the value of consideration in a deal.
- Mergers and acquisitions. A board needs an independent view before agreeing a price, or a seller wants to understand what the business should command before entering negotiation.
- Share transfers between shareholders. Buy-outs, exits, share buy-backs and transfers under a shareholders' agreement usually need a defensible value rather than a negotiated one.
- Fundraising. Investors want an independent reference point, and founders want to avoid anchoring on a figure they cannot support.
- Tax and transfer pricing. Intra-group restructuring and cross-border asset transfers have to satisfy tax authorities on both sides.
- Disputes, matrimonial matters and liquidation. The report will be tested by someone whose job is to disagree with it.
How the valuation is built
Three approaches are recognised, and the standard plus the nature of the business determines which one leads. Most reports use one primary approach and a second as a cross-check.
| Approach | How it works | Best suited to |
|---|---|---|
| Income | Discounted cash flow — forecast free cash flows discounted at a risk-adjusted rate, usually a WACC built from observable market inputs | Established businesses with a supportable forecast |
| Market | Multiples from comparable listed companies or comparable transactions, adjusted for size, growth, margin and marketability differences | Businesses with genuine listed or deal comparables |
| Cost | Adjusted net asset value — assets and liabilities restated to fair value | Asset-holding companies, investment holding vehicles, loss-making or wind-down situations |
Discount rate construction is where valuations are most often challenged. We build the cost of equity from observable inputs — risk-free rate, equity risk premium, an unlevered and relevered beta drawn from a comparable set, and size or company-specific premiums where the evidence supports them — and show the derivation rather than asserting a rate.
What you receive
- A signed valuation report setting out purpose, valuation date, standard of value, scope and limitations
- The methodology and why it was selected over the alternatives
- Every material assumption, with its source
- Sensitivity analysis on the assumptions that move the answer most
- Supporting workings, provided to your auditor where they need to see the model
- Direct responses to auditor or reviewer questions as part of the engagement
The standard of value matters more than people expect. Fair value under HKFRS 13, market value under the International Valuation Standards, and fair value in a shareholder dispute are not the same concept, and they can produce materially different numbers for the same business. Agreeing this at scoping avoids a report that answers the wrong question.
Discounts, premiums and control
A minority shareholding is not simply a pro-rata share of the whole. Where the subject is a non-controlling interest, discounts for lack of control and lack of marketability may apply, and their size has to be evidenced rather than picked from a range. Conversely, valuing a controlling interest may support a control premium. Whether these adjustments apply at all depends on the purpose and the standard of value — which is why that gets settled first.
Sector experience
Valtech's Hong Kong team has valued businesses across artificial intelligence, agriculture, retail, mining, internet and media, automotive, education, financial services, real estate and property management, entertainment, electronic equipment and infrastructure — including reports signed for public disclosure by issuers listed in Hong Kong and Singapore.
Common questions
What is the difference between equity value and enterprise value?
Enterprise value is the value of the operating business regardless of how it is financed. Equity value is what belongs to shareholders after deducting net debt and other claims. A market multiple such as EV/EBITDA produces enterprise value, so the bridge from there to equity value — debt, cash, surplus assets, and any other claims — has to be set out explicitly. Confusing the two is one of the most common errors in informal valuations.
Can you value a loss-making company?
Yes. Losses do not mean an absence of value — they mean the income approach needs care. Depending on the situation the analysis may rest on a forecast that shows a path to profitability, revenue-based market multiples, an adjusted net asset approach, or scenario analysis weighted by probability. What matters is that the chosen route is justified against the purpose and the standard.
How current does the financial information need to be?
The valuation speaks as at a specific date, and we work from information available at that date. Where the valuation date is some months before the engagement, we look at what was knowable then rather than applying hindsight. Management accounts up to the valuation date, the most recent audited figures, and a forecast prepared around that time are the usual starting set.
Do you provide a range or a single figure?
It depends on the purpose. Financial reporting generally requires a point estimate, because the accounts need one number. Transaction support and negotiation are often better served by a range plus sensitivity analysis, because the useful output is understanding what drives the value. We agree which is appropriate during scoping.
Related valuation services
- Purchase Price Allocation
- Startup & Pre-IPO Valuation
- Valuation for HKEX Notifiable Transactions
- Share Option & ESOP Valuation
This page summarises how Valtech approaches this engagement type in Hong Kong. It is general information, not valuation, accounting, tax or legal advice for any specific entity. Scope and methodology are agreed in an engagement letter before work begins.
Request a quotation
Tell us what needs valuing.
Send the basics — entity, purpose, reporting date and standard. A director-level valuer in Kwun Tong will come back with scope, fee and turnaround.