The Placer case (2018) from a valuation perspective

Published on 01 Jul 19 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

This article evaluates the landmark High Court decision in Commissioner of State Revenue v Placer Dome Inc from a valuation perspective and discusses a conceptual valuation framework which can be used to address several issues regarding the valuation of goodwill raised in the High Court decision. The key components of this conceptual valuation framework include: a distinction between the mere existence of legal goodwill and the materiality of its value; a focus on the going concern basis of valuation; an allowance for the evolutionary changes in the market value of identifiable assets; a recognition of the forward-looking net and active attractive forces which bring in custom as key drivers of goodwill value (rather than backward-looking, gross or passive attractive forces); and a recognition of excess profits/cash flows as a reliable indicator of the existence of material goodwill value. This conceptual valuation framework should be applied in accordance with the specific legal and factual context in which the relevant valuation exercise arises.

Author profiles

Dr Hung Chu

Hung is a Director of Lonergan Edwards & Associates Limited. Dr Hung Chu completed his master degree in Finance and Banking (with Merit among the top 2% of graduates) from the University of Sydney and his doctoral degree in Finance from the University of Technology, Sydney (graduated on Chancellor's List for Exceptional Scholarly Achievement in PhD research). He has 12 years of experience in the provision of valuation services and numerous technical papers published in academic and practitioners' journals. - Current at 11 July 2019

More by Hung CHU

• Assessing market value ratios for roll-over relief provision - 01-November-2019
• Valuation of contract intangibles for tax and duty purposes - 01-October-2016
• Value allocation: Upstream and downstream segments - 01-August-2016
• Pitfalls in applying the small company risk premium for tax and duty purposes - 01-April-2016
• Why the restoration method is flawed - 01-February-2016
• Common errors in applying the market value concept - 01-July-2015
• Pitfalls in the valuation of specialised in situ fixed assets for tax and duty purposes - 01-June-2015
• A re-evaluation of the marriage value concept and its tax implications - 01-April-2014
• Traps in valuations for tax purposes - 01-October-2013
• The value of mining information and its tax implications - 01-August-2013
• Financing risks and the application of the Spencer market value concept - 01-June-2013
• An evaluation of control premium and its tax implications - 01-October-2012
• The valuation of cash holdings and its tax implications - 01-August-2012

Click here to expand/collapse more articles by Hung CHU.

Wayne Lonergan

Wayne is an internationally distinguished practitioner with over 40 years valuation experience in takeovers and mergers, litigation including loss assessment, tax, stamp duty and other regulatory purposes. Wayne is the author of two leading valuation texts and over 100 published technical papers in various leading industry journals. - Current at 11 July 2019

More by Wayne Lonergan

• Why the restoration method is flawed - 01-February-2016
• Common errors in applying the market value concept - 01-July-2015
• The value of mining information and its tax implications - 01-August-2013
• The valuation of cash holdings and its tax implications - 01-August-2012

Click here to expand/collapse more articles by Wayne Lonergan .