Assets And Equipment

Assets and Equipment Lists::

Providing detailed and accurate business asset and equipment lists is one the key ways a business seller can increase the value of their business when selling.

What is a business asset? There are accounting rules and definitions about what is considered a business asset.

In most business structures, assets are demonstrated on the balance sheet, where you can see current and non-current assets.

However, 95% of business sales transactions do not involve the sale of the company or the associated entity. This means the asset values on the balance sheet or associated depreciation schedule are ineffective in presenting asset-related information in a business sales process.

There are essentially two kinds of business assets:

Tangible business assets

Real Estate: The business owns land, buildings, and office spaces
Equipment and Machinery
Furniture and Fixtures
Vehicles
Parts

Intangible business assets

1. Customer lists and databases

2. Websites and domains

3. Software and Technology: Proprietary software, computer programs, algorithms, databases, and technological infrastructure developed by the business.

4. Licenses and Permits: Legal authorisations or permissions the business obtains to conduct specific activities, such as operating licenses, permits, or certifications.

5. Contracts and Agreements: these are assignable

If you want to maximise the sale price and reduce the time it takes to sell, you must create your business asset list and provide details of any assets that will be transferred to the buyer.

Example Documents:

Frequently Asked Questions

Can we use just use the depreciation schedule in the financial statements?

Commonly, the depreciation schedule will not accurately reflect all the assets and the replacement or market values of the assets that are being offered for sale.

What do we do if we can’t determine the value of assets?

In most instances you will be able to determine a fair market value using open sources like price lists and third-party websites. If you are struggling to determine value, then ranking is one option. Ranking the value against other similar assets.

How detailed should the list be?

Well that depends on the business and the total scope of the assets being offered with the sale. If you’re a restaurant it’s advised not to list every type of cutlery being sold like 45 knives and 64 spoons, but rather group certain types of assets like cutlery.

The main principle to observe is that this list purpose is to defend the value of the business. So the more comprehensive and reflective of true value the better. We have had some assets go over 3 pages.

How should works in progress, accounts receivable or work contracted but not invoiced yet be managed?

In most conventional business sales in Australia (95%+) the entity that owns the business and its asset is not being sold. In the case that we are selling the company then please speak directly to your broker about how to approach this.

We don’t include work in progress or work contracted in the asset list we deal with this in separate section of the business information package. These assets have different values based on the stage and cycle of production and delivery of the product or service, and we negotiate the sale, transfer or how we manage these items separately from the asset sale.

What about items that are leased or financed?

If the item that is leased or financed is going to be paid out and is full unencumbered, then include its market/replacement value in the asset list.

If you are aiming to assign the lease and or finance agreement to the buyer as part of the sale process, then it should not be included in the asset list. Leased or financed items that are to be assigned should be documented and stated in the business package but immediately after the asset list section.

The expenses of the leased or financed items listed on the profit and loss can be added back to the earnings report if the financed item is going to be paid out. This is because this finance expense will not apply to the incoming owner.