1st NATIONAL

CONGRESS on
Property Valuation
and Taxation

1st NATIONAL CONGRESS on Property Valuation and Taxation

Philippine Valuation Standards

Mr. Raul Punzalan
Technical Adviser

Approach to

Developing the Philippine

Valuation Standards

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Objectives
Provide consistency & understanding between
providers & users of valuations
Raise the quality of public & private sector
valuations & reporting
Promote transparency & reliability of valuations
Reduce financial risk for users of valuations

Approach to

Developing the Philippine

Valuation Standards

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Review of existing national, regional &

international Standards
Existing Standards used in the Philippines (private sector)
Uniform Standards of Professional Appraisal Practice (USPAP)
International Valuation Standards (IVS)

Royal Institution of Chartered Surveyors (RICS) Red Book

Aus/NZ Professional Practice

The European Group of Valuers Associations (TEGOVA)

Approach to

Developing the Philippine

Valuation Standards

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Operational Considerations

Harmonized with the IVS

Presented & vigorously reviewed by TWG &
exposed to stakeholders
Final draft endorsed for the DOF Secretarys
approval (Promulgated under DO 37-09 dated 19
October 2009)
Standards to be adopted initially by the local
government assessors; NGAs & Private Sector
expected to follow

Procedures for the Development of the Philippine Valuation Standards

A Four-Stage Process
1 PVS Draft

Philippine
Valuation
Standards

Maintenance &
Revision

Technical
Review &
Exposure

Approval &
Implementation

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

What are STANDARDS?

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Standards ARE statements of:

Recognised principles & concepts
Best practices in valuation services & reporting
Accepted definitions
They do NOT:
X Describe different valuation techniques
X Prescribe specific methods of valuation for
different purposes
X Tell valuers how to value!

what consists the STANDARDS?

I. Fundamentals
II. Core Standards
III. Application Standards
IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

P h i l i p p i ne Va l u at i o n S ta n d a rds

I. Fundamentals

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

1. CONCEPTS FUNDAMENTAL TO GAVP

Provides commentary on legal, economic, &
conceptual frameworks
Defines and explains valuation terms & concepts (e.g., Real Estate;
Real Property; Personal Property; Asset; Market Value; Price; Cost
&Value; Highest & Best Use)

3 market-based valuation approaches:

1) Sales Comparison
2) Income Capitalization
3) Cost

P h i l i p p i ne Va l u at i o n S ta n d a rds

I. Fundamentals
2. CODE OF CONDUCT
Addresses the ethical & competency
requirements of Valuers
Serves the public interest
Ensures that the results of valuations are
reliable, consistent, & unbiased

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

P h i l i p p i ne Va l u at i o n S ta n d a rds

I. Fundamentals
3. PROPERTY TYPES
Real property

Personal property
Businesses
Financial interests

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

P h i l i p p i ne Va l u at i o n S ta n d a rds

II. Core Standards

1. MARKET VALUE BASIS OF VALUATION

2. BASES OTHER THAN MARKET VALUE

3. VALUATION REPORTING

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

P h i l i p p i ne Va l u at i o n S ta n d a rds

III. Valuation Applications

1. VALUATION FOR FINANCIAL REPORTING

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

A direct extract from the International

Accounting Standards (IAS) & International
Financial Reporting Standards (IFRS)
Defines & categorizes assets (including land &
buildings, machinery, etc) for accounting
purposes

2. VALUATION FOR SECURED LENDING PURPOSES

Reduces risk through exposure to inaccurate
valuations used by the banking sector.

P h i l i p p i ne Va l u at i o n S ta n d a rds

III. Valuation Applications

3. VALUATION OF PUBLIC SECTOR ASSETS FOR
FINANCIAL REPORTING

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Explains the requirements for valuing assets

owned or controlled by government or quasigovernment bodies
Measures public assets at either Historic Cost
(less accounting depreciation) or Fair Value
(i.e., mark-to-market value)

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

1. REAL PROPERTY VALUATION

Summarizes the appraisal process & minimum
requirements to arrive at a reasonable & realistic
valuation
3 approaches to value (Cost, Income, Sales Comparison)
Market value, HABU, etc.

2. VALUATION OF LEASE INTERESTS

Explains leasehold interests & the bundle of rights
Shows the hierarchy of rights & interests inherent in
the leasehold

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

3. VALUATION OF PLANT, MACHINERY &

EQUIPMENT

Common approach to value is by Depreciated

Replacement Cost [Replacement Cost New Less
Depreciation (RCNLD)]

4. VALUATION OF INTANGIBLE ASSETS

Discusses intellectual property rights, patents,

trademark, copyrights, trade secrets, goodwill,
franchise, legal life of intangible asset, etc.
Provides the basis for comparison with other types of
valuations

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

5. VALUATION OF PERSONAL PROPERTY

Provides guidance on the valuation of personal property

(e.g., works of art, antiques, collectibles, furniture, fixtures &
fittings, equipment, etc.)

6. BUSINESS VALUATION

Covers the valuation of businesses for the purpose of

shareholdings, acquisitions & disposals
Shows the relationship between the property assets as
part of a going concern & the overall value of the
business

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

7. CONSIDERATION OF HAZARDOUS & TOXIC

SUBSTANCES IN VALUATION

Provides guidance for situations where environmental

conditions may have an adverse effect on property
values

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

8. THE COST APPROACH FOR FINANCIAL

REPORTING (DRC)

The basic guidance for DRC valuations: defines physical,

functional & external obsolescence

Introduces the concepts of subject to adequate

profitability & service provision (in the case of public
buildings)

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

9. DISCOUNTED CASH FLOW (DCF) ANALYSIS FOR MARKET

VALUATIONS & INVESTMENT ANALYSES
Provides the approach in valuing businesses & certain
types of investment properties
Emphasizes the level of expertise & specialists skill
required in undertaking such valuations

10. VALUATION FOR AGRICULTURAL PROPERTIES

Provides guidance on valuation related to crop
production
Provides guidance on categorizing non-realty elements
& on adopting different valuation approaches for
different asset elements

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

11. REVIEWING VALUATIONS

Distinguishes between administrative (compliance), desk,

field, technical, & valuation reviews
Explains the purpose of the review as a reference point

12. VALUATION FOR TRADE RELATED PROPERTIES

Relates to valuation of hotels, gas stations, restaurants,

etc.
Provides that the DCF is the normal approach adopted
for individual valuations of these properties

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

13. MASS APPRAISAL FOR PROPERTY TAXATION

Describes the framework for Ad Valorem Property

Taxation, or statistical and economic studies under
government administrative programs

Recognizes that valuations undertaken for taxation

purposes are carried out in compliance with local laws &
regulations.

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

14. VALUATION OF PROPERTIES IN THE EXTRACTIVE

INDUSTRIES
Differentiates between mineral extraction & the
petro-chemical industry in accordance with the UN
Framework Classification
Provides a general explanation of the industries &
terminology used
Differentiates between 4 categories: exploration,
resource, development, & production properties &
emphasizes the specialist nature of quantifying
reserves, etc.

P h i l i p p i ne Va l u at i o n S ta n d a rds

IV. Guidance Notes

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

15. VALUATION OF HISTORIC PROPERTY

Provides guidance on valuing heritage properties

Justifies the 3 valuation approaches as applicable to

the type & use of the property being valued (e.g.,
functional, income producing, monumental, etc.)

Procedures for the Development of the Philippine Valuation Standards

Approval & Implementation

Draft 4 - Final Draft

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

(Standards After Exposure)

Study
of a
Single
NGA

Exposure to
NGAs

Approved
by DOF

Accepted by
NGAs

Adopted by local
govt assessors

Amend
Administrative
Orders / Rules
& Regulations

For General
Valuations

For Real
Property Tax
Valuations

1st NATIONAL
CONGRESS on
Property Valuation
and Taxation

Thank You!