Glossary
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P
Physical Obsolescence
A loss of utility due to the physical deterioration of the asset or its components resulting from its age and normal usage that results in a loss of value.
Plant and Equipment
A class of tangible asset that is:
(a) held by an entity for use in the production or supply of goods or services, for rental by others or for administrative purposes AND
(b) expected to be used over a period of time.
Plant and Machinery
— SEE: Plant and Equipment
Portfolio
An assemblage of various assets or liabilities held or managed by a single entity.
Premium Profits Method
A method that indicates the value of an intangible asset by comparing an estimate of the profits or cash flows that would be earned by a business using the asset with those that would be earned by a business that does not use the asset.
Present Value
The value of a future payment or series of future payments discounted to the current date or to time period zero.
— SEE: Net Present Value
Price / Earnings Ratio
The price of a share of stock divided by its earnings per share.
Prospective Financial Information
Forecast financial data used to estimate cash flows in a discounted cash flow model.
Q
R
Rate of Return
An amount of income (loss) and/or change in value realised or anticipated on an investment, expressed as a percentage of that investment.
Real Cash Flows
Cash flows over a period adjusted for inflation.
Real Estate
Land and all things that are a natural part of the land, eg, trees and minerals, things that have been attached to the land, eg, buildings and site improvements, all permanent building attachments, eg, mechanical and electrical plant providing services to a building, that are both below and above the ground.
Real Property
All rights, interests and benefits related to the ownership of real estate.
Relief from Royalty Method
A method that estimates the value of an intangible asset by reference to the value of the hypothetical royalty payments that are saved through owning the asset, as compared with licensing it from a third party.
— SEE also: Royalty
Replacement Cost
The current cost of a similar asset offering equivalent utility.
— SEE also: Modern Equivalent Asset
Replication Method
A valuation method under the Cost Approach typically used for valuing financial instruments that provides an indication of the current value of an instrument or portfolio by reproducing or “replicating” its risks and cash flows in a hypothetical, or synthetic, alternative.
Reproduction Cost
The current cost of creating a replica of the asset.
Residual Value
(1)The anticipated value of an asset at the expiration of its useful life.
— SEE also: Salvage Value
(2) IFRS definition (IAS16): “The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.”
— The application of the IFRS definition is described in IVS 300 Valuations for Financial Reporting.
Reversionary Value
The estimated value of an investment property at the end of a period during which the rental income is either above or below the market rent.
— SEE also: Terminal Value
Reversionary Yield
The anticipated yield from an Investment Property once a the Reversionary Value is attained.
— SEE also: All Risks Yield; Reversionary Value; Yield
Risk Free Rate
The rate of return available in the market on an investment free of default risk.
Risk Premium
A rate of return added to a risk-free rate to reflect the default risk associated with an investment.
Royalty
A payment made for the use of an asset, especially an intangible asset or a natural resource.
— SEE also: Relief from Royalty Method
S
Sale and Leaseback
Simultaneous transactions in which the buyer becomes the Lessor and the seller becomes the Lessee.
— SEE also: Lessee; Lessor
Salvage Value
The value of an asset that has reached the end of its economic life for the purpose it was made. The asset may still have value for an alternative use or for recycling.
— SEE also: Residual Value
Service Potential
The capacity of an asset to continue to provide goods and services in accordance with the entity’s objectives.
Special Assumption
An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.
Special Purchaser
A particular buyer for whom a particular asset has special value because of advantages arising from its ownership that would not be available to other buyers in a market.
Special Value
An amount that reflects particular attributes of an asset that are only of value to a special purchaser.
Specialised Property
A property that is rarely if ever sold in the market, except by way of sale of the business or entity of which it is part, due to uniqueness arising from its specialised nature and design, its configuration, size, location or otherwise.
— SEE also: Trade Related Property
Summation Method
A valuation method that provides an indication of the value of an entire asset by the addition of the separate values of its component parts.
— SEE also: Asset Based Approach
Synergistic Value
An additional element of value created by the combination of two or more interests where the value of the combined interest is worth more than the sum of the original interests.
Systematic Risk
Risk that affects an entire market and not just specific participants or assets. Systematic Risk cannot be diversified.
— SEE also: Business Risk; Financial Risk; Market Risk; Systemic Risk; Unsystematic Risk
Systemic Risk
The risk of damage to a system arising from the failure or collapse of a component element of that system.
— SEE also: Business Risk; Financial Risk; Market Risk; Systematic Risk; Unsystematic Risk
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