1. VALUATION & ADVISORY SERVICES
BUSINESS VALUATION 2015

2. Financial Asset Valuation
Employee Subscription Right
Convertible Bond
Redeemed Preferred Stock
Guarantee Contract
DEFINITION
The employer entitle employee to purchase company stock at a
specific price in a specified period of time.
Besides the principal and interest, holder can convert bond into a
specified number of common stock in the issuing company at a
specific price.
A type of preferred stock that allows the issuing company to buy
back the stock at a specific price after a specified period of time
without paying interest for preferred stock anymore.
A contract to perform the promise, or discharge the liability, of a
third person in case of his default.
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3. Financial Asset Valuation
WHEN to ASSESS the FAIR VALUE
The issue date.
EMPLOYEE SUBSCRIPTION RIGHT
CONVERTIBLE BOND
REDEEMED PREDERRED STOCK
GUARANTEE CONTRACT
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On balance sheet day when following
circumstances occur:
1. Guarantee contract possibly bring the
economic benefits outflow; Or
2. The amount of economic outflow cannot be
measured reliably.

4. Financial Asset Valuation
VALUATION METHODS
Employee
Subscription
Right
Use binomial
option pricing
model of income
approach.
Convertible
Bond/Redeeme
d Preferred
Stock
Use discounted
cash flow method
and binomial
option pricing
model of income
approach.
Guarantee
Contract
Evaluate enterprise
credit rating in
accordance to
international rating
criteria and then
use binomial
option pricing
model.

5. Financial Asset Valuation
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6. Company Valuation
Company Valuation
Fair Value
DEFINITION
According to related report standards, qualified person
issue the report of the amount of sources and reserves of
mineral and energy. Report standards for mineral are JORC
Standards, NI43-101 and SAMREC Standards, for oil is
PRMS.
The value of the property which would change hands
between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having
reasonable knowledge of relevant facts.
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7. Company Valuation
WHEN to ASSESS the FAIR VALUE
According to the regulation of exchange market, there
must be “acquisition price valuation” on/before the
following occasion: 1) extremely substantial
transaction, 2) major transaction, 3) related party
transaction, 4) reverse takeover action
MERGER and
ACQUISITION
INVESTMENT and FINANCING
REFERENCE
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When investing, financing or applying for loan, valuation
is required as decision making evidence.
TAX REPORT When involves endowment, legacy distribution or asset
transfer, valuation is required as evidence of tax report.

8. Company Valuation
VALUATION METHODS
Priority
Market
Comparison
With necessary
adjustments, use the
value of traded
similar enterprise or
listed company as
comparable case to
valuate the fair value
of the subject.
Acceptable
Income
Approach
Valuate the projected
net income of the
subject and discount
it to determine the
value of asset.
Exception
Cost
Approach
Reasonably appraise
the value of all assets
and liabilities on the
balance sheets to
determine the value
of the subject.

9. Company Valuation
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10. Minerals and Energy Sources Valuation
Sources and
Reserves Report
Valuation Report
DEFINITION
According to related report standards, qualified person
issue the report of the amount of sources and reserves of
mineral and energy. Report standards for mineral are JORC
Standards, NI43-101 and SAMREC Standards, for oil is
PRMS.
According to related report standards, qualified valuer
issue the report of the value of mineral and energy.
Related report standards are CIMVAL Standards, SAMVAL
Standards and VALMIN Standards.
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11. Minerals and Energy Sources Valuation
WHEN to ASSESS the FAIR VALUE
According to the regulation of exchange market,
following listed documents must be attached with
sources and reserve report: 1) newly listed, 2)
extremely substantial transaction, 3) major
transaction, 4) reverse takeover action
SOURCES and
RESERVES REPORT
VALUATION REPORT
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According to the regulation of exchange market,
following listed documents must be attached with
sources and reserve report: 1) extremely substantial
transaction, 2) major transaction,3) related
transaction, 4) reverse takeover action

12. Minerals and Energy Sources Valuation
VALUATION METHODS
Market
Comparison
On valuation point,
use the value of
similar market
transaction to valuate
fair value of the
subject, which
requires recent
comparable cases to
realize the objectivity
and reliability.
Income
Approach
Sum up discounted
value of annual
projected net cash
flow. This method is
suitable for mine
development in the
production phase.
Cost
Approach
Apply the amount of
investment and cost
of mine development
as the evidence for
mine valuation. This
method is suitable for
mine development in
the early phase.

13. Minerals and Energy Sources Valuation
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14. Biological Asset Valuation
Biological Asset
Agriculture Products
Fair Value
DEFINITION
Animals or plants which have life, such as grape trees crops,
artificial forest trees, sheep, cows and pigs.
Products of biological assets such as grapes, cotton, wood, wool,
milk and meat.
The value of the property which would change hands between a
willing buyer and a willing seller, neither being under any
compulsion to buy or to sell and both having reasonable
knowledge of relevant facts.
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15. Biological Asset Valuation
WHEN to ASSESS the FAIR VALUE
In accordance with the provisions of the IAS 41,
following circumstances need to be assessed:
1. The initial booked day (such as the birthday of a cow,
the time crops are planted).
2. Each balance sheet day (at least twice a year for
public companies).
BIOLOGICAL
ASSET
AGRICULTURE
PRODUCT
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1. The initial booked day (like the harvest day).
2. Each balance sheet day (at least twice a year for
public companies).

16. Biological Asset Valuation
VALUATION METHODS
Priority
Market
Comparison
If there is an active
market for biological
assets or agricultural
products, the market
prices should be the
appropriate basis for
determining the fair
value of the assets.
Acceptable
Income
Approach
If the price or value
of a biological asset
market cannot be
obtained, the fair
value should be
determined by the
present value of the
expected net cash
flow.
Exception
Cost
Approach
It is suitable for
biological assets,
such as the newly
planted fruit trees,
which have little or
no biological
conversion from the
original cost.

17. Biological Asset Valuation
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18. Merger and Acquisition Valuation
Enterprise Merger
Assessment of
Acquisition Price
Assessment of Acquisition
Price Allocation
DEFINITION
In order to form a process that involves the input and the
processing of input, create a business which can make
output when purchase or merge assets or companies.
Value the fair value of the acquired assets or companies at
the acquisition date, to make sure the acquisition price
reasonable.
On the acquisition date, the acquisition price will be
assessed into acquired tangible assets, intangible assets,
debt and goodwill.
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19. Merger and Acquisition Valuation
WHEN to ASSESS the FAIR VALUE
According to the regulation of exchange market, there
must be “acquisition price valuation” on/before the
following occasion: 1) extremely substantial
transaction, 2) major transaction, 3) related party
transaction, 4) reverse takeover action
ASSESSMENT OF
ACQUISITION PRICE
(BEFORE MERGE)
ASSESSMENT OF
ACQUISITION PRICE
(AFTER MERGE)
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In accordance with the provisions of the IFRS 3,
enterprises merger transaction must be followed by
the action “Assessment of Acquisition Price
Allocation”.

20. Merger and Acquisition Valuation
VALUATION METHODS
Assessment of Acquisition Price
Market
Approach
Use the recent market transaction as
comparable to be the valuation
evidence.
Income
approach
Calculate the replacement cost of
replace or reproduce company,
based on the market price of similar
market transaction, or the sum of
the value of each independent asset
in the enterprise.
Cost
Approach
Calculate the sum of the discounted
value of predicted net cash flow in
the year.
Assessment of Acquisition Price Allocation
Asset/D
ebt
Categories Valuation
approaches
Valuation
methods
Asset Securities Market
Approach
Market value
method
Asset Trademarks/c
opyrights
Income
approach
Option money
economization
Asset Patents/
technology
Income
approach
Residual income
method
Asset Tenant
relationship
Income
approach
Residual income
method
Asset Machines and
equipment
Cost approach Replacement
cost method
Debt Account
receivables
Cost approach Adjusted book
value method
Debt Long-term
debt
Income
approach
Discounted cash
flow method
Debt Employee
options
Income
approach
Binomial option
pricing method
Asset Goodwill Acquisition price less net asset
price

21. Merger and Acquisition Valuation
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22. Intellectual and Intangible Asset Valuation
Promotion
Customer
Art
Contract
DEFINITION
Trademark, authenticate, internet domain name, noncompetitive
agreement.
Client relation and client contract.
Audio-visual copyright, musical copyright, literary copyright,
pictorial copyright.
Use permission, construction permission, contract of tenancy,
supply and marketing contract, employment contract.
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Technology Patent, technology, formula, software, database.

23. Intellectual and Intangible Asset Valuation
WHEN to ASSESS the FAIR VALUE
1. In accordance with the provisions of IFRS 3, valuation
for all assets and liabilities (intangible assets
included) in acquired business is required when
merge.
2. When intellectual assets and other intangible assets
are pledged for loan.
3. Applied as reference when merger, acquisition or
contribution of capital happen.
INTELLECTUAL and
INTANGIBLE ASSET
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24. Intellectual and Intangible Asset Valuation
VALUATION METHODS
Trademark,
copyright
Option money
economization
Multi-period
excess earnings
approach
Patent, internet
domain name
Multi-period
excess earnings
approach
Customer
relation
Multi-period
excess earnings
approach
Supply and
marketing
contract,
noncompetitive
agreement,
contract of
tenancy
Income difference
comparison
Software,
formula,
software
Income difference
comparison/
Multi-period
excess earnings
approach

25. Intellectual and Intangible Asset Valuation
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26. Paul Hung
Associate Director
Head of Business Valuation, Greater China
+86 137 1878 3915
paul.hung@cbre.com.cn
Peter Ma
Manager
Business Valuation, Greater China
+86 10 8688 0561
peter.ma@cbre.com.cn
Valuation & Advisory Services | China
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