Professional Documents
Culture Documents
Introduction
Introduction
• What is the Valuation Profession?
• What are the opportunities in the Valuation
Profession?
• How can one become a Valuer?
1
Introduction
• Where has the Profession been?
• Where is it now?
• Where it will inevitably be?
• What are the tools of the trade?
• How is a dependable valuation arrived at?
2
Demand for International
Standards
• During the past 15 years valuation for financial
reporting have moved closer to “mark-to-market”
as the basis for valuation i.e. Market Value rather
than historical cost
• Provides directors, share holders, governments,
oversight agencies and the general public a more
accurate and transparent balance sheet of public
companies
3
What kind of value?
• “Value” can have many meanings
– Value to whom?
– Under what conditions?
– For what use?
– When?
• To avoid confusion valuers NEVER use
the word value alone
Market Value
• Has been the first effort of IVSC after its
inception in 1980.
• Came in handy for the IASB shift to Fair
Market Value Accounting from previous
historical cost-based accounting.
• IFRS still have some shortcomings from
Market Value perspective, but IASB has
continuing efforts with IVSC.
4
Different “hats” value can wear
• Markets and common usage dictate that
many value concepts are possible:
– Market Value – we’ll define this shortly
– Other than market Value – any type of value
that does not meet the definition of market
value
• Even when used by lay persons, most
people think Market value
• IVSC – IVS 1
– Intent of each element, implicit assumptions
or underlying theory clearly and appropriately
addressed in accompanying explanatory text
– Provides:
• Clarity
• Removes ambiguity
• Transportability to different jurisdictions
5
Market Value Rationale
• Must distinguish price from value
• Must establish credible and reliable basis
for market value estimate
• Must separate opinion from evidence
• Must have a concept and definition that is
understandable, relevant, reliable, and
meaningful to the marketplace
6
Elements of Market Value
• “The estimated amount...
– refers to a price expressed in terms of money payable for
the Property in an arm's-length market transaction.
– Market Value is measured as the most probable price
reasonably obtainable in the market on the date of
valuation in keeping with the Market Value definition.
– It is the best price reasonably obtainable by the seller and
the most advantageous price reasonably obtainable by the
buyer.
– This estimate specifically excludes an estimated price
inflated or deflated by special terms or circumstances such
as atypical financing, sale and leaseback arrangements,
special considerations or concessions granted by anyone
associated with the sale, or any element of Special Value.
7
Elements of Market Value
• "...between a willing buyer..."
– refers to one who is motivated, but not compelled to buy.
– This buyer is neither over-eager nor determined to buy at
any price.
– This buyer is also one who purchases in accordance with
the realities of the current market, and with current market
expectations, rather than in relation to an imaginary or
hypothetical market that cannot be demonstrated or
anticipated to exist.
– The assumed buyer would not pay a higher price than the
market requires.
– The present Property owner is included among those who
constitute "the market".
– A Valuer must not make unrealistic assumptions about
market conditions nor assume a level of market value
above that which is reasonably obtainable.
8
Elements of Market Value
• ".. .after proper marketing..."
– means that the Property would be exposed to the
market in the most appropriate manner to effect its
disposal at the best price reasonably obtainable in
accordance with the Market Value definition.
– The length of exposure time may vary with market
conditions, but must be sufficient to allow the
Property to be brought to the attention of an
adequate number of potential purchasers.
– The exposure period occurs prior to the valuation
date.
9
Current IVS Status
• Market value definition recognized
worldwide
• Standards also equally recognized and
serve as national standards for some
countries
• Standards provide base for a fit to national
laws and circumstances
• Standards apply to all property types
10
Valuation Bases Other than
Market Value
11
The Professional Valuer
12
Role of the Professional Valuer
13