It comes as no surprise that many commentators are expecting an economic downturn ranging from a short-lived blip to a full-scale depression as a result of the ongoing coronavirus pandemic. Whatever the size of the impact, and irrespective of measures put in place by different governments around the world, company failures or significant contractions can, unfortunately, be expected.

One of the things that has continually amazed me through this pandemic is the connectivity we can enjoy at personal and business level through technology. Some of the products were familiar already – Facebook, Facetime and the good old telephone – but many previously niche names have now become so familiar they’re even turning into their own verbs – “Shall we Zoom at 3?” “I was Whatsapping my book club last night” and so on.

Because of this, these brands and technologies – both intangible assets - are flying high. But on the down side, some intangibles, which are these days estimated to make up 80% of a business’s assets, will have lost a chunk of value. These may be restaurant brands, where the future is uncertain, or, perhaps clothing brands, where even the most fashion-conscious amongst us are unlikely to buy a new outfit to wear whilst digging into our pasta mountain at teatime. Some of this loss may be permanent, some thankfully temporary.

At Valuation Consulting, we specialise valuing businesses and intangible assets. The majority of the time we look at going concern businesses in “normal” economic circumstances. Generally, these valuations are carried out under International Valuation Standards, which consider a willing buyer and a willing seller in a hypothetical transaction – neither of them has a particular need to buy or sell the asset. This gives “fair value”.

We have also historically looked at impairment valuations or distress values in certain circumstances. Sometimes we have been engaged to consider this for a specific asset of a business in trouble for business-specific reasons. In other scenarios, our valuation is of an asset held by a pension fund as part of an Asset Backed Funding (“ABF”) arrangement. There is no doubt an increasing number of businesses conscious that their intangible asset values will have fallen.

The purpose of an impairment valuation is most often for accounting purposes – whether internal or external. Companies are still required to produce their annual accounts, with directors assessing both tangible and intangible assets at the year end for impairment. The requirements of FRS102 are for an impairment review to be carried out where there are indicators of impairment. Impairment losses are charged to the profit and loss account (or revaluation reserve for an asset previously revalued). For large companies, IAS 36 requires goodwill and intangible assets with indefinite lives to be assessed for impairment at each year end and for other assets including intangibles with finite lives when there is an indication of impairment. Impairment indications may be external – for example a worse than expected economic environment, such as we have under coronavirus – or internal – such as where an asset relates to a business area which will be discontinued. This may again be a business decision made as a result of coronavirus.

The key input to an impairment valuation is the directors’ expectations of the future. This is of course true for all valuations, but it is particularly important for the directors and valuers to understand the factors driving the suspected impairment and how they are converted into trading figures and cashflows. It is up to us to translate this into a valuation, by considering the current value of those future expected cash flows, taking into consideration likelihood of achieving the projections, whether adequate financing is available, what a suitable multiple or discount rate would be. As no one can tell the future, these factors need to be considered very carefully in determining value.

In the case of pensions, it is incredibly important that a pension fund which holds an asset by way of an ABF understands the impact of insolvency scenarios on the value of the asset. The rules for such valuation are governed by the Pension Protection Fund, which requires scenarios to be considered on an annual basis. Each potential scenario is considered, as is its likelihood and the impact it would have on value. The PPF also requires a distressed insolvency valuation to be carried out – once an insolvency value is determined, a discount is applied according to a schedule set out by the PPF to give effectively a worst case scenario valuation. This is a complex area, which requires the input of a valuation specialist with significant experience.

If you are concerned that your business, or that of your client, may have been adversely impacted not only by coronavirus but by any other factor, the team at Valuation Consulting would be pleased to discuss your valuation requirements. All our initial discussions are information reviews are free of charge, so please do get in touch and we’ll see how we can help.

If of interest, please contact This email address is being protected from spambots. You need JavaScript enabled to view it. at VC.



T. +44(0) 203 928 0000



Sign-up to receive free news and updates via email.