Valuation is an Art, not a Science…(Gold Coast Selection Trust Limited v Humphrey [1948])

…albeit an art with a certain amount of guesswork (Myer v The Commissioner of Taxes [1937])

“Historically, there was considerable debate as to whether share valuations were an art or a science. Proponents of the former school claimed that share valuations were possibly the most subjective aspect of a professional accountant’s or merchant banker’s work.

Share valuations today are much more scientific.

Any practitioner who attempts a share valuation without a thorough understanding of the science is more likely than not to find himself or herself on the receiving end of a professional negligence suit.

However valuations are not a precise science due to the imperfections in the market where transactions take place. Even in those rare instances where the valuer has perfect knowledge of the market, the market does not always have perfect knowledge of values and the valuation process.

The dates of the above quoted cases tell a story in themselves. Since 1937, the science of valuation has advanced rapidly to a point where now, practitioners are able to support their valuation conclusions with some serious science.

While valuation opinion still relies to a large extent on subjective assessment, it is simply not possible for a practitioner to exercise the art of valuation without the science to back up his/her conclusions.”