APEC agrees need to adopt global valuation standards across region

  • First time an economic forum has acted to address inconsistent asset valuation
  • Adoption of International Valuation Standards across Asia-Pacific region could open the door for global uptake

APEC Finance Ministers have agreed that all 21 member economies should work towards region-wide adoption of global standards for valuing assets due to the recent huge growth in cross-border transactions.

APEC member economies account for 44% of global trade and 53% of the world’s real GDP in purchasing power parity (PPP) terms, yet approaches to valuing assets vary considerably across the region, as they do around the world. Some APEC economies have established successful valuation principles and standards, but in others the concept is far less developed.

The formal agreement at the annual APEC Finance Ministers’ Meeting in Beijing, China, means public and private sector organisations will work with the International Valuation Standards Council (IVSC) to promote high quality valuation practices and professionals in their economies. The coordinated effort will also include the Asia-Pacific Business Advisory Council (ABAC), valuation professional organisations, experts from industry and other relevant bodies.

Sir David Tweedie, chairman of the IVSC, the independent international standard setter for valuation, said: “For the very first time the need to address the current inconsistencies in valuation between countries has been formally acted upon by one of the world’s leading economic forums, whose members account for nearly half of all world trade.  Currently, no single set of global standards for estimating the value of assets has been comprehensively adopted across the world. At best this inconsistency creates a barrier to trade; at worst it represents a systemic danger to markets and the global economy. APEC, as a leading economic forum, could promote a region-wide move towards globally accepted valuation standards.”

The IVSC develops and maintains standards for the reporting and disclosure of valuations, especially those relied upon by investors and other third-party stakeholders as the basis of a transaction or in financial statements and other published documents. It has established a working group to audit the valuation landscape of each APEC economy, promote the ideal valuation standards regime, and meet with existing valuation groups to work on how to help them introduce standards.

IVSC trustee Nicholas Brooke said: “APEC’s recognition of the importance of consistent valuation has been driven by the enormous investment volumes flowing in and out of the Asia-Pacific region. To invest with certainty you need asset valuations that can be trusted, particularly if publicly traded companies are involved.  That is as true for mature economies within APEC such as the US, Canada and Australia as it is for emerging ones like Vietnam, Chile and Peru. This affects everyone, not least China whose funds are investing heavily around the world.”

The need for valuation standards has been gathering momentum in the region, with ABAC’s 2014 report to the Finance Ministers stating: “Valuations are central to decision-making within the global economy, applying both to capital and property market decisions and to decisions and actions in public and private sector organizations, including regulatory organizations. The public interest, economic growth and development of financial systems are impacted in a multitude of ways by decisions and actions that are dependent on valuations. This critical role of valuation underscores the importance for economies in the region to agree on the adoption of high-quality valuation standards across jurisdictions globally and develop a credible valuation profession.”

Earlier in the year an advisory group on Capacity Building within APEC’s Financial System identified clear benefits for region-wide convergence toward robust global valuation standards. It also identified the need to develop sustainable valuation professional organisations as caretakers of professional standards, education and knowledge depositories. This has now been formally endorsed at the Finance Ministers’ Meeting.

 


London, Monday, 27 October 2014

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