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THE INTERNATIONAL VALUATION STANDARDS (IVS) IMPROVEMENT PROJECT

In June 2009 the International Valuation Standards Board (IVSB) approved a project to update and improve the International Valuation Standards (IVS). It was agreed to follow the recommendation made by the outgoing standards board prior to the restructuring of the IVSC that regard should be had to the Critical Review published in 2007 and the comments received thereon.
— GET 2007 Critical Review Report (pdf)

The Board considered that in implementing these recommendations there was a need to considerably simplify the standards to improve their accessibility. It also decided that:

• There was a need for the standards to address the valuation of financial instruments;
• That the standards should not be presented as a rule book for valuers but a set of principles for good valuation practice that would be equally accessible and useful to valuation users and others interested in valuation.

In June 2010 an Exposure Draft of the proposed new Standards was published with a comment period of three months:
— GET Exposure Draft (pdf)
— GET Overview and Questions for respondents (pdf)
— SEE Comment Letters (note comment period closed 3 September 2010)

Following an initial review of the comment letters received at its meeting on 8 October, the IVSB confirmed that it would undertake further consultation by arranging Round Table discussions during November with invited participants to discuss some of the main issues raised by the comment letters. These meetings were held in Hong Kong, London and New York.
— GET summary report of the Round Table discussions (pdf)

After further review of the comment letters and of the Round Table discussions, on 22 November the IVSB tentatively decided that the main changes to the Exposure Draft should be:

1. To create an IVS Framework, which will contain much of the material in IVS 100 - 103 in the Exposure Draft. The Board accepts that that much of this material is in the nature of a discussion about valuation concepts and principles. Although this material is important for the proper understanding and application of the IVS, it needs to be clearly separated from those standards that provide a clear direction as to what should be done in the course of a valuation assignment.
2. To create a new general standard dealing with the implementation phase of a valuation assignment. This will take the material that is more suited to a mandatory standard from the proposed IVS2 and IVS3 in the Exposure Draft, and fills a gap that some perceived existed between the scope of work and reporting standards. This is an alternative presentation of material proposed in the Exposure Draft that is intended to improve the logic and flow of the standards. It will contain no requirements that were not proposed in the Exposure Draft.
3. To reorganise the Asset Standards (the 300 series in the Exposure Draft) so that the requirements of each standard are more clearly distinguished from the background discussion. This is likely to be done by putting the “standard” first and following this with the discussion of the nature of the assets in the sector, identification of valuation approaches commonly used and matters that are material when considering their value. In most cases the standard is brief, containing only specific requirements for the application of the principles contained in the general standards to that asset class.
4. The 201 series on Financial Reporting will be restructured and presented differently. The majority of the text in the Exposure Draft will be retained but clearly presented as guidance on various valuation requirements under IFRS, and will make it clear that IFRS, or such other accounting standard that may be relevant, are the standards that must be followed.

These tentative decisions are to assist the development of the final standards but will not be confirmed by the Board until the final revised standards are approved.

Progress in 2011

A “Staff Draft” of the proposed new standards reflecting the above changes and other comments made on the Exposure Draft was published on the IVSC web site on 14 February 2011.
— GET Staff Draft (126 pages; 1Mb pdf)

At its meeting on 4 March 2011 the Standards Board considered a series of amendments to the Staff Draft that had been proposed by members of the Board and others. The time taken to discuss and resolve these issues required the meeting to be adjourned and continued on 5 March.

Subject to the changes agreed during this meeting, the Board unanimously approved all of the standards included in the Staff Draft except for IVS 232, Trade Related Property. The Board considered that further consultation is required on the interaction between this proposed standard and IVS 200 Businesses and Business Interests and IVS 230 Real Property Interests. Since elements of each of these standards appear in the draft Trade Related Property Standard the Board wishes to consider further whether a separate standard is necessary.

Some late representations from a number of North American Real Estate institutes indicated that the real estate community in the US and Canada may have an understanding of the application of the Cost Approach to real estate that is different from the way it is applied to other asset types and in other world regions. The Board agreed to remove some of the paragraphs that described the application of the cost approach in IVS 230 Real Property Interests pending a further project to identify the nature of the differences, whether these have the potential to result in a materially different conclusion and consulting on proposals for resolving any diversity. This project needs to be undertaken in conjunction with the current consultation on the Depreciated Replacement Cost method being undertaken by the Professional Board.

The Board agreed that the approved standards would be effective from 1 January 2012, with earlier adoption encouraged.

The printed version of the approved standards should be available in early July, with an electronic subscription service to follow. Details of the price of the new standards and how they may be ordered will be announced closer to the publication date.

updated 14 March 2011

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