The valuation of businesses and assets is integral in financial reporting, IPOs and transactions. Over the years, the HKEX, the SFC and the HKICPA published their views and findings on the common issues identified in the valuation profession and the valuations prepared for financial reporting and transaction purposes.

In this article, we briefly summarise the authorities’ concerns and five common valuation pitfalls for which valuation practitioners and users should remain vigilant. 

As an independent valuation review has been taking  a more influential role  in audit processes and fair value estimation of company asset and liabilities reporting, the corresponding industry standards is gaining more detailed attention from all valuers and other industry practitioners. A professional practitioner should always consider to obtain additional necessary assurance from experts in relevant professional field.

On 4 July 2019, the SFC of Hong Kong issued the “Statement on the Conduct and Duties of Directors when Considering Corporate Acquisitions or Disposals”, reiterating the importance of independent professional valuations in relation to the fiduciary duties of the directors of public companies in their planned acquisitions or disposals. The authority particularly points out the importance of due diligence, which is an area that many valuation practitioners in Hong Kong do not possess the relevant expertise nor resources to advise and work on.

Most startups nowadays are involved in “New Economy” sectors such as fintech, biotech, tele-communications, medicines, shared economies, blockchain, and artificial intelligence.