International Valuation Standards 2017 Queenstown 29 June Presenter Chris Stanley

Transcription

1 International Valuation Standards 2017 Queenstown 29 June 2017 Presenter Chris Stanley

2 Why Have Standards? To ensure concepts such as Market Value & Fair Value are consistently applied Provides financial information to users that are comparable & consistent across international borders To assist with Financial Reporting Banking risk management Public protection

3 IVS 2017 Background The 2017 Standards represent a major change from IVS 2013 IVS 2013 was considered to have insufficient content on methodology IVS 2017 expands on methodology and clearly identifies mandatory requirements. IVS 2017 is arranged into: Framework General Standards, Asset Standards There is also an Introduction section and a Glossary

4 IVS Introduction The introduction section covers the background to the IVSC and the objectives building confidence and public trust by producing standards and securing their universal adoption and implementation for the valuation of assets across the world It also discusses the basis for the development of standards which are designed to do one or more of the following: Identify or develop globally accepted principles and definitions Identify and promulgate considerations for the undertaking of valuation assignments Identify specific matters that require consideration and methods commonly used for valuing different types of assets / liabilities The IVS consist of mandatory requirements that must be followed in order to comply. Certain aspects of the standards do not direct or mandate any particular course of action but provide fundamental principles / concepts that must be considered.

5 IVS Glossary Asset or Assets individual asset / liability / group of either or both Client the entity for whom the valuation is performed Jurisdiction legal and regulatory environment in which the valuation is performed May an action / procedure that valuers have a responsibility to consider Must an unconditional responsibility Participant relevant participants pursuant to the bases of value utilised Purpose the reason the valuation is performed Should indicates responsibilities that are presumptively mandatory Significant and/or Material professional judgement based on impact on valuation and/or end user decisions Subject or Subject Assets assets valued in the engagement Valuation Purpose or Purpose of Valuation see purpose Valuation Reviewer professional valuer engaged to review work of another valuer Valuer individual, group of individuals or firm possessing necessary skills Weight amount of reliance placed on a particular approach or input Weighting analysing and reconciling results from different methods

6 IVS Framework Compliance with Standards if a statement is made that a valuation has been undertaken in accordance with IVS it is implicit that it has been prepared in compliance with all relevant standards issued by IVSC Assets and Liabilities the standards apply to the valuation of both assets and liabilities and include groups of both Valuer individual or firm possessing the necessary qualifications, ability and experience to undertake a valuation in an objective, unbiased and competent manner Objectivity requires the valuer to make impartial judgements on inputs and assumptions Competence valuations must be prepared having the appropriate technical skills, experience and knowledge to undertake the subject valuation Departures a circumstance where specific legislative, regulatory or authoritative requirements must be followed that differ from some of the requirements of IVS. A valuer may still state compliance.

7 IVS 101 Scope of Work 1. This covers both valuations and valuation reviews 2. All valuation advice must be appropriate for the intended purpose 3. A valuer must ensure that intended recipients understand what is to be provided and any limitations on its use before it is finalised 4. A valuer must communicate the scope of work to its client prior to completion including the following: Identity of the valuer and any material connection must be disclosed Identify of the client Identity of other intended users Identify asset being valued The valuation currency Purpose of the valuation this will determine basis of value. Define basis of value must be appropriate for the purpose. Valuation date

8 IVS 101 Scope of Work - Cont Nature and extent of the valuers work and any limitations Nature and source of information relied upon Significant assumptions and/or special assumptions The type of report being prepared Restrictions on use, distribution and publication of the report Compliance with IVS Wherever possible the SOW should be established and agreed prior to commencing. A written SOW may not be necessary however a written SOW should be prepared Changes to the SOW may occur during the valuation process. Changes must be communicated to the client

9 IVS 102 Investigations and Compliance General Principle to be compliant with IVS valuation assignments, including valuation reviews, must be conducted in accordance with all the principles set out in IVS that are appropriate for the purpose and the terms & conditions set out in the Scope of Works. Investigations investigations made during the course of the assignment must be appropriate for the purpose of the valuation and basis of value. Sufficient evidence must be assembled with the extent of evidence required determined by valuer judgement for the purpose of the valuation. Limits may be agreed on the extent of valuers investigations and noted in the SOW. Information provided to the valuer by other parties should be considered in terms of credibility significant inputs may require consideration, investigation and/or corroboration. In considering credibility and reliability of information provided valuers should consider: The purpose of the valuation Significance of the information on the valuation conclusion Independence and expertise of the source of information

10 IVS 102 Investigations and Compliance - Cont Valuation Record - a record must be kept of the work performed during the valuation process for a reasonable period of time having regard to any relevant statutory, legal or regulatory requirements. The records should include: Key inputs Calculations Investigations Analysis Copy of draft reports send to client Copy of final report

11 IVS 103 Reporting It is essential that the report communicates the information necessary for a proper understanding of the valuation. A report must provide the intended users with a clear understanding of the valuation The report must set out a clear and accurate description of the scope, its purpose, intended use, and disclosure any assumptions, special assumptions, significant uncertainty or limiting conditions that directly affect the valuation. Content will be determined by purpose, complexity and users requirements. The format of the report should be agreed as part of establishing the scope of work. Compliance does not require a particular form or format of report however the report must be sufficient to communicate to the intended users the scope of the assignment, the work performed and the conclusion reached. The report should also be sufficient for an appropriately experienced valuation professional, with no prior involvement with the valuation, to review the report and understand it.

12 IVS 103 Reporting - Cont The report must convey, at a minimum: The scope of work performed, including the elements noted in para 20.3 of IVS 101Scope of Work to the extent that each is applicable to the assignment. The approach or approaches adopted The methods or methods applied The key inputs used Assumptions made Conclusions of value and principal reasons for conclusions reached Date of valuation. Valuation Review Reports - must convey at a minimum: Scope of review performed included items in IVS The valuation report being reviewed and the inputs and assumptions upon which the valuation is based The reviewers conclusions including supporting reasons Date of the report

13 IVS 104 Bases of Value Compliance with this mandatory standard requires a valuer to select the appropriate basis (or bases) of value and follow all applicable requirements with that basis of value. Basis of value describe the fundamental premises on which the valuation will be based. It must be appropriate to the terms and purpose of the valuation as a basis of value may influence or dictate a valuers selection of methods, inputs and assumptions, and the ultimate opinion of value. A valuer may be required to use a bases of value that are defined by statute, regulation, private contract or other document. Most bases of value have certain comment elements: An assumed transaction An assumed date Assumed parties

14 IVS 104 Bases of Value - Cont IVS Defined Bases of Value: Market Value as defined previously Market Rent - as defined previously Equitable Value between two defined, knowledgeable and willing parties Investment Value value to a particular participant Synergistic Value combination value Liquidation Value assets sold on a piecemeal basis Other Bases: Fair Value IFRS Fair Market Value Fair Value Fair Rent Valuers must choose the relevant basis according to the terms and purpose of the valuation. It must be appropriate.

15 IVS 104 Bases of Value - Cont Premise of Value / Assumed Use Describes the circumstances of how an asset is used. Common Premises of Value are: Highest and best use physically possible, legally permissible and financially feasible Current use / existing use the way currently used Orderly liquidation reasonable selling period of assets compelled to be sold Forced sale - proper marketing may not be possible. Need to specify what restraints on sales process apply Entity Specific Factors Factors that may not be available to participants: Additional value or reduction in value from the creation of a portfolio of assets Unique synergies between the asset and other assets owned by the entity Legal rights, tax benefits

16 IVS 104 Bases of Value - Cont Assumptions and Special Assumptions generally fall into two categories: Assumed facts that are consistent with, or could be with, those existing at the date of valuation (Assumptions) Assumed facts that differ from those existing at the date of valuation (Special Assumptions) Examples of Assumptions include: An Agreement to Lease is formalised into A Deed of Lease Stated contract rents are actually being paid Examples of Special Assumptions include: A proposed building has been completed Certain level of pre leasing / pre sales will be achieved Resource Consent is obtained

17 IVS 105 Valuation Approaches & Methods Consideration must be given to the relevant and appropriate valuation approaches. The principal valuation approaches are: Market Approach Income Approach Cost Approach The most appropriate approach should be selected under the particular circumstances and should consider: Appropriate bases of value and premise of value determined by the terms and purpose The strengths and weaknesses of the approaches and methods The nature of the asset and approaches / methods used by participants The availability of reliable information Valuers are not required to use more than one approach. Multiple approaches should be used when there is uncertainty. Outcomes should be reconciled into a single conclusion not averaged.

18 IVS 105 Valuation Approaches & Methods - Cont If the outcomes of multiple approaches are widely divergent a valuer should perform procedures to understand the differences and consider whether on of the approaches/methods provides a more reliable indication of value Valuers should maximise the use of relevant observable market information in all three approaches. Although no one approach or method is applicable in all circumstances price information from an active market is generally considered to be the strongest evidence of value. Market Approach Should be applied and afforded significant weight when: The subject asset has recently been sold in a transaction appropriate for consideration under the basis of value The subject asset or substantially similar assets are actively traded There are frequent and/or recent observable transactions in substantially similar assets

19 IVS 105 Valuation Approaches & Methods - Cont Even when not using the market approach the use of market based inputs should be maximised in the application of other approaches rents, yields, discount rates Market Approach Methods: Comparable Transaction Method Key steps: Identify the unit of comparison used by participants Identify the relevant comparable sales and calculate key metrics Perform a consistent comparative analysis of qualitative and quantitative differences between the transactions and subject Make necessary adjustments to reflect differences Apply the adjusted metrics to the subject If multiple metrics used, reconcile output

20 IVS 105 Valuation Approaches & Methods - Cont A Valuer should choose comparable transactions considering: Several transaction preferable to a single transaction Very similar assets provide the best comparison Most recent transactions Generally arms length Sufficient information available and reliable Actual transactions preferable to intended transactions Examples of common adjustments: Material characteristics age, size, specification Restrictions Location Income Expected growth Yields Unusual terms Ownership characteristics

21 IVS 105 Valuation Approaches & Methods - Cont Guideline Publicly Traded Comparable Method Utilises information on publicly-traded comparables that are the same or similar to the subject asset. Similar to Comparable Transactions Method however differences: Valuation metrics/comparables are available at valuation date Detailed information is available Comply with recognised accounting standards Key Steps: Identify the valuation metrics/comparables used by participants Identify relevant guideline publicly-traded comparables and calculate key valuation metrics Perform a consistent analysis of qualitative and quantitative similarities / differences Make necessary adjustments Apply the adjusted metrics

22 IVS 105 Valuation Approaches & Methods - Cont A Valuer should choose comparables considering: Multiple comparables preferable to a single comparable Evidence from similar publicly-traded comparables preferable Actively traded securities preferable to thinly-traded securities Examples of common adjustments: Material characteristics age, size, specification Relevant discounts and premiums Restrictions Location Profitability Growth Marketability and control characteristics Ownership characteristics

23 IVS 105 Valuation Approaches & Methods - Cont Income Approach The Income Approach provides an indication of value by converting future cash flow to a single current value. Should be afforded significant weight when: The income producing ability is the critical element affecting value from a participant perspective Reasonable projections of the amount and timing of future income are available but few relevant market comparables Should also consider other approaches when: The income producing ability is only one of several factors affecting value There is significant uncertainty on timing and amount of future income Lack of access to information on the asset Has yet to produce income but projected to do so Income Approach Methods: Discounted Cash Flow Method Future cash flow is discounted back to valuation date to give the present value. For long life assets the DCF may include a terminal value estimated value at end of explicit projection period

24 IVS 105 Valuation Approaches & Methods - Cont Key steps in DCF: Choose the appropriate type of cash flow pre/post tax, real/nominal Determine the most appropriate explicit period Prepare cash flow budgets for that period Determine whether a terminal value is appropriate and calculate Apply the discount rate to the forecasted future cash flow Type of Cash Flow: Cash flow to whole asset or partial interest nominally whole asset Pre-tax or post-tax Nominal versus real real cashflows do not consider inflation Currency The type of cash flow chosen should reflect participants view point for real property normally on a pre-tax basis.

25 IVS 105 Valuation Approaches & Methods - Cont Explicit Forecast Period: Valuers should consider the following factors when selecting the forecast period: Life of the asset Reasonable period for which reliable data is available Should be sufficient to achieve a stabilised level of growth and profits For cyclical assets period should generally include an entire cycle For finite-lived assets generally over full life of the asset Cash Flow Forecasts: Based on Prospective Financial Performance (PFI). A valuer must perform analysis to evaluate the PFI, the assumptions underlying the PFI and their appropriateness for the valuation purpose. Projected cash flow will reflect one of the following: Contractual cash flow Most likely set of cash flows Probability weighted expected cash flow Multiple scenarios of possible future cash flow

26 IVS 105 Valuation Approaches & Methods - Cont Terminal Value: Where an asset is expected to continue beyond the explicit cash flow forecast the valuer must estimate the value of asset at the end of that period Should consider: Whether the asset is deteriorating/finite-lived or indefinite-lived Whether there is future growth potential for the asset beyond the period Whether there is a pre-determined fixed capital amount expected to be received at the end of period The expected risk level of the asset For cyclical assets should consider the cyclical nature of the asset Tax issues (if any) There ae a range of methods for calculating terminal value including: Gordon Growth Model/Constant Growth Model Market Approach/Exit Value Salvage Value/Disposal Cost

27 IVS 105 Valuation Approaches & Methods - Cont Discount Rate The rate at which the forecast cashflow is discounted should reflect not only the time value of money but also risks associated with the type of cash flow and the future operations of the asset. Common methods for developing a discount rate include: Capital asset pricing model (CAPM) Weighted average cost of capital (WACC) Observed or inferred rates The internal rate of return (IRR) Weighted average return on assets (WARA) The build up method generally only used in the absence of market inputs In developing a discount rate a valuer should consider: The risks associated with the cash flows Type and life of the asset Rates implicit in market transactions Location Type of cash flow and bases of value

28 IVS 105 Valuation Approaches & Methods - Cont Cost Approach: An indication of value based on economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction, unless undue time, inconvenience, risk or other factors are involved. Calculates the current cost to replace / reproduce less deductions for physical deterioration and all other relevant forms of obsolescence. Should be applied and afforded significant weight when: Participants would be able to recreate an asset with similar utility without regulatory restriction quickly enough that a participant would not pay a significant premium to use a similar asset immediately The asset is not income generating and unique in nature The bases of value is based on replacement cost Cost Approach Methods: Replacement Cost Method modern equivalent asset being current design and construction methods Reproduction Cost Method creating an exact replica Summation Method sum of the components All approaches consider depreciation and obsolescence

29 IVS 105 Valuation Approaches & Methods - Cont Cost Considerations. Should capture all of the costs that would be incurred by a typical participant being both direct and indirect costs Direct Costs: Materials Labour Indirect Costs: Transport Installation Fees Commissions Overheads Taxes Finance costs Profit margin

30 IVS 105 Valuation Approaches & Methods - Cont Depreciation/Obsolescence Physical obsolescence loss of utility due to physical deterioration resulting from age Functional obsolescence loss of utility resulting from inefficiencies in the subject compared to new External or economic obsolescence Loss in utility caused by economic of locational factors external to the asset Should consider the physical and economic lives of an asset. The physical life is how long the asset could be used before it would be worn out or beyond economic repair. The economic life is how long it is anticipated that the asset could generate financial returns. There are two forms of functional obsolescence: Excess capital cost caused by change in design, construction, technology or techniques resulting in MEA with lower capital cost Excess operating costs caused by improvements in design resulting in MEA with lower operating costs Economic obsolescence may arise when external factors affect an asset. Examples are changes in demand for product/services, oversupply and affordability

31 IVS 200 Businesses & Business Interests Establish whether the valuation is of the entire entity, share or a shareholding in the entity The type of value provided must be appropriate to the purpose of the valuation and communicated in the Scope of Works. Clearly define the business or business interest being valued as there may be different levels such as Enterprise Value, Total Invested Capital Value, Operating Value, Equity Value Must select appropriate Bases of Value. Select the appropriate Valuation Approach / Methods and must follow the requirements of IVS 105 Market Approach should follow section 20 & 30 IVS 105. Obtain data from appropriate sources share market, acquisition market, prior transaction and offers. Make appropriate adjustments to comparables. Income Approach should follow section 40 & 50 IVS 105.Consider pretax / post tax basis. Select appropriate capitalisation rate /discount rate consistent with the cashflow used

32 IVS 200 Businesses & Business Interests - Cont In selecting capitalisation rates and discount rates consider factors such as the level of interest rates, rates of return expected by participants for similar investments and the risk associated with the business interest. Cost Approach cannot normally be applied in the valuation of businesses and business interests. In valuing businesses and business interest consideration should be given to: Ownership rights Business information Economic and industry considerations Operating and non operating assets Capital structure considerations

33 IVS 210 Intangible Assets An Intangible Asset is a non-monetary assets that manifests itself by its economic properties. It does not have physical substance but grants rights and economic benefit to the owner. Specific intangible assets are defined and described by characteristics such as their ownership, function, market position and image. Many types of intangible assets but often fall into one or more of the following categories: Market related: trademarks, trade names, domain names Customer related: customer contracts, contractual customer relationships Artistic related: rights to benefit from plays, films, music Contract related: royalty agreements, broadcast rights, natural resources Technology based: right to use databases, formulae, software

34 IVS 210 Intangible Assets - Cont Purpose must understand purpose of the valuation Goodwill typically measured as the residual amount after values of tangibles, intangibles and monetary assets adjusted for actual or potential liabilities. Goodwill may need to be further divided into transferable goodwill and non-transferable or personal goodwill Goodwill will frequently include elements such as: Company specific synergies Opportunities to expand the business Benefit of assembled workforce Benefit to be derived from future assets Assemblage and going concern value

35 IVS 210 Intangible Assets - Cont Valuation may be required for: Financial reporting Tax Litigation Statutory Collateral lending Bases of Value the valuer must select the appropriate bases of value. Market Approach: Valuers must comply with IVS and Should only apply the market approach when information is available on similar intangible assets on or near the valuation date and sufficient information is available for the valuer to adjust for all significant differences.

36 IVS 210 Intangible Assets - Cont Income Approach: Must comply with 40.2 and 40.3 of IVS 105 The most commonly used methods: Income Approach Methods: Excess earnings method Relief from royalty method Premium profit method with or without method Greenfield method Distributor method Cost Approach: Value of an intangible is determined based on a the replacement cost of a similar asset Commonly used to value: Third party software Internally developed and internally used software Assembled workforce

37 IVS 210 Intangible Assets - Cont Discount rates / Rates of return: In selecting a discount rate valuers should perform an assessment of the risks associated with the intangible Intangible assets often have higher risk than tangibles The greater the specialisation it may have a higher risk Single intangibles may have greater risk than groups of assets Intangible assets with longer lives are often considered higher risk Discount rate benchmarks are observable rates based on market evidence. The valuer should consider: Risk free rates with similar maturities to the subject Cost of debt or borrowing rates with similar maturities Cost of equity or equity rates with similar maturities Weighted average cost of capital Internal rates of return of recent acquisitions

38 IVS 300 Plant and Equipment A valuation of P&E will normally require consideration of a range of factors relating to the asset itself, its environment and physical, functional and economic potential. Asset related factors: Technical specification Remaining useful economic or effective life considering maintenance Condition including maintenance history Any functional, physical and technological obsolescence If leased, lease renewal options Potential loss of a complimentary asset the length of lease of a building Additional costs associated with additional equipment, transport, commissioning

39 IVS 300 Plant and Equipment -Cont Environment related: Location of raw materials and market for the product Impact of environmental legislation on operations and decommissioning costs Radioactive substances Toxic waste Licences to operate and restrictions Economic related: Actual or potential profitability of the asset and operating costs Demand for the product both micro and macro Potential for asset to be put to a more valuable use than current Valuations of P&E should reflect the impact of all forms of obsolescence on value.

40 IVS 300 Plant and Equipment -Cont To comply with IVS 101 consideration must be given to the degree to which the asset is attached to, or integrated with, other assets: To degree to which attached to land or buildings Degree it is part of an integrated production line It may be considered to be part of the real property lift, HVAC Bases of Value: Must select appropriate bases of value market, liquidation Valuation Approaches: Market vehicles, machinery. Income not normally possible. Cost commonly adopted for P&E especially if specialised. First establish MEA then deduct physical, functional & economic obsolescence.

41 IVS 400 Real Property Interests Scope of Work Must describe real property interest to be valued and identify superior or subordinate interest that affect the interest to be valued. To comply with IVS 101 and 102 the following must be considered: Evidence required to verify the real property interest. Extent of any inspection. Responsibility for information on site area and building areas. Responsibility for confirming the specification and condition of the building. Extent of investigation into the nature, specification and adequacy of services. Existence of any information on ground & foundation conditions. Responsibility for the identification of actual or potential environmental risks. Legal permissions or restrictions on use Special Assumptions may include: Value assuming completion Lease in place Free from contamination

42 IVS 400 Real Property Interests Valuation Approaches: Market Adopt a suitable unit of comparison. Unit of comparison should be one commonly used by participants in the relevant market and consideration given to differences in location, quality, use, zoning, date, and market conditions. Income Direct capitalisation (all risks yield method) or DCF. The yield or discount rate should be derived from market transactions. The discount rate may be established by a built up approach from a typical risk free rate if limited market evidence. Cost Normally used where no evidence of market transactions or no identifiable actual or notional income stream. Normally based on the modern equivalent asset (MEA) at the date of valuation. The R Cost needs to reflect design fees, developers profit and finance costs. It is then adjusted for obsolescence which includes physical condition, functionality and economic utility.

43 IVS 410 Development Property Applies to: Construction of buildings Previously undeveloped land being developed Redevelopment of developed land Improvement or alteration of existing structures Land allocated for development in a statutory plan Land allocated for a higher value use or higher Valuations required for: Feasibility Loan security Acquisition Tax Litigation Financial reporting

44 IVS 410 Development Property Valuers must follow IVS 400 The residual value approach can be very sensitive to changes to key inputs/ assumptions. The greater the sensitivity to changes to inputs the greater the need to disclose the impact on the valuation Must select appropriate Bases of Value Significant assumptions used in the valuation must be communicated and must be agreed and conformed in the Scope of Work. Assumptions should be those a typical market participant would make land stability etc. At any stage in the development the valuation needs to reflect the current market conditions If the development is closely tied to a business/trading activity reference must be made to IVS 200

45 IVS 410 Development Property Two main approaches: Market Approach Residual Approach Must follow the requirements of IVS 105 The approach utilised will depend on basis of value as well as market evidence available Market Approach Can be utilised if transactions of similar properties Often limited evidence available Maybe appropriate for assessing completed value of the project Income Approach May be appropriate for assessing completed value of the project Cost Approach Key to establishing development cost of the project May also be appropriate for establishing completed value of specialised assets

46 IVS 410 Development Property Residual Method The valuer should consider and evaluate the reasonableness & reliability of: Source of information on the proposal plans & specification Source of information on construction costs Key inputs to the residual model: Completed value based on current market inputs Construction costs need detailed costs at each stage of development Consultants fees include valuers, legal and other professionals Marketing costs leasing and sales Timing project duration Finance costs- should allow even if self funded Development profit- should allow for this based on risk profile Discount rate

47 IVS 500 Financial Instruments Financial Instrument A contract that creates rights or obligations between specified parties to receive or pay cash or other financial consideration. Include derivatives or other contingent instruments, hybrid instruments, fixed income, structured products and equity instruments. Valuations may be required for: Acquisitions, mergers and sales of businesses Purchase and sale Financial reporting Regulatory requirements Internal risk and compliance procedures Tax Litigation To comply with the requirement to identify the asset or liability to be valued in the Scope of Works must address: Class of instrument to be valued Whether valued as individual instruments or a portfolio Unit of account

48 IVS 500 Financial Instruments - Cont To comply with IVS 102 investigations must be adequate having regard to the purpose of the assignment and consider: All market data used and must be understood and validated Valuation model must be appropriate and capture contractual terms and economics of the instrument Observable prices should be adjusted to reflect contractual terms and economics of the instrument Where possible use multiple valuation approaches and must explain / reconcile differences Reporting must be appropriate and should contain sufficient information to allow users to understand inputs and factors influencing value

49 IVS 500 Financial Instruments - Cont Must have regard to: Materiality Uncertainty Complexity Comparability Underlying instruments Must select appropriate Basis of Value Must follow IVS 105 and select appropriate Valuation Approach: Market normally best indication of value Income may be determined utilising a DCF Cost not normally used Need to consider: Valuation Inputs Credit Risk Liquidity and Market Activity Control Environment

50 The Link to PINZ Standards As a member of PINZ and/or NZIV you are required to comply with Standards To be compliant you must adhere to IVS as adopted by PINZ / NZIV Any departure must be documented and agreed PINZ Standards (API / PINZ Valuation and Property Standards effective in NZ 1 October 2009) refer to the then current IVS Standards IVS Standards were subsequently been replaced with 2013 version and now IVS 2017 NZIV and PINZ adopting IVS 2017 effective 1 July 2017 PINZ Guidance Notes are designed to provide additional guidance specific to NZ

51 ANZVGN1 Valuation Procedures - Real Property ANZVGN1 gives comprehensive guidance on content See section 4.0 Must include content relevant to the type of property and style of report Usually include: Instructing Party Purpose Date of Valuation Basis of Value Methodology, Reconciliation and Value range Legal Description Nature of Interest Lease Details Dimensions and Area Location Resource Management

52 ANZVGN1 Valuation Procedures - Real Property - Cont Site, Services and Environmental Hazards Structural Improvements Outgoings and Recoveries Marketability Market Conditions Market Evidence Single Valuation Figure Disclaimers and Qualifications Also refer to Business Focus 2 Reports, Content and Compilation which provides commentary on types of report and content

53 ANZVGN2 Valuations for Mortgage and Loan Security Purposes Additional content: Risk Analysis comment on factors that may have an adverse impact on value Risk Rating a rating method can be used as part of the risk analysis Alternative Use Value where the vacant possession value is likely to be significantly different from the value of a property leased then both values should be reported

54 API / PINZ Guidance Notes (GN) & Technical Information Papers (TIP s) Name ANZVGN 1 ANZVGN 2 ANZVGN 3 ANZVGN 4 ANZVGN 5 ANZVGN 6 ANZVGN 7 ANZVGN 8 ANZVGN 9 Subject Valuation Procedures Real Property Valuation for Mortgage & Loan Security Purposes Valuation for Mortgage & Loan Security Purposes (Forced Sale) Valuation for Rating & Taxation Valuation for Compulsory Acquisitions Valuations of accommodation Hotels Valuation of Partial Interests Valuation for use in Offer Documents Assessing Rental Value

55 API / PINZ GN & TIP s Name ANZVGN 10 ANZVGN 11 ANZVTIP 1 ANZVTIP 2 ANZVTIP 3 ANZVTIP 4 Subject Valuation of Agricultural Property Valuation of Self Storage Facilities Retrospective Valuations Market Value of Property, Plant & Equipment in a Business Addressing the Concept of Forced Sale Valuations for Insurance Purposes NZVGN 1 Valuations for Financial Reporting (under review 2017) NZVGN 2 Valuations of Houses under Construction / New Houses NZVTIP 1 Goods & Services Tax (GST) in Property

56 Practical Application Tangible Assets Type of Valuation Standard / Guidance Note / TIP All IVS 101 Scope of Works IVS 102 Investigations and Compliance IVS 103 Reporting IVS 104 Bases of Value IVS 105 Valuation Approaches and Methods Finance Valuation IVS 400 Real Property Interests ANZVGN 1 Valuation Procedures Real Property ANZVGN 2 Valuations for Mortgage & Loan Security May also reference asset class & Plant & Equipment Insurance ANZVGN 1 ANZVTIP 4 Valuations for Insurance Purposes

57 Practical Application Type of Valuation Standard / Guidance Note / TIP Rental ANZVGN 1 ANZVGN 9 Assessing Rental Value May also refer to asset type Financial Reporting ANZVGN 1 NZVGN 1 Valuations for use in NZ Financial Reports Market Value Hotel IVS 200 Business and Business Assets IVS 300 Plant and Equipment ANZVGN 1 ANZVGN 6 Valuation of Accommodation Hotel

58 Changes to Consider Review your Scope of Work to ensure compliance Review your report content to ensure compliance there have been changes to the naming of General Standards and Asset Standards and new General Standards. The OLD IVS 300 and IVS 310 have been deleted. Old New IVS 101 Scope of Work IVS 101 Scope of Work IVS 102 Implementation IVS 103 Reporting IVS 102 Investigation and Compliance IVS 103 Reporting IVS 104 Bases of Value IVS 105 Valuation Approaches and Methods IVS 200 Business and Business Interests IVS 210 Intangible Assets IVS 220 Plant And Equipment IVS 230 Real Property Interests IVS 233 Investment Property under Construction IVS 250 Financial Instruments IVS 200 Business and Business Interests IVS 210 Intangible Assets IVS 300 Plant And Equipment IVS 400 Real Property Interests IVS 410 Development Property IVS 500 Financial Instruments

59 Key Issues Standards are there to protect the end user, ensure consistency and protect the valuer Standards are a Top Down process start with principles, specific asset guidance and application They are the valuation worlds equivalent to the accounting concept Generally Accepted Accounting Practice Clearly state and agree what you will do and not do Scope of Works The report content will reflect the purpose of the valuation, the bases of value and the complexity Available online at IVSC and PINZ

60 What s Next Standards are living documents changes occur due to changing international and national needs To ensure you are dealing with current versions go online to IVSC and PINZ IVSC are about to issue an Agenda Consultation Document looking for comment on future topics for inclusion in any revision to the IVS get involved PINZ & API have been reviewing all Guidance Notes Converting these to Technical Information Papers (TIP s) These have been released individually for comment & then ratification and adoption NZVGN 1 Valuations for Use in New Zealand Financial Reports is under review and will be released for comment very soon. Take time to review and give feed back to your Standards Board.