This Glossary defines certain terms used in the International Valuation Standards. This Glossary is applicable to the International Valuation Standards and does not attempt to define basic valuation, accounting or finance terms, as valuers are assumed to have an understanding of such terms (see definition of “valuer”).The definitions in this glossary are those used by the IVSC within the current version of IVS. The International Valuation Standards Council, the authors and the publishers do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise.
Glossary updated: March 2020
Asset or Assets
To assist in the readability of the standards and to avoid repetition, the words “asset” and “assets” refer generally to items that might be subject to a valuation engagement. Unless otherwise specified in the standard, these terms can be considered to mean “asset, group of assets, liability, group of liabilities, or group of assets and liabilities”. (IVS page 3)
A Premise of Value or Assumed Use describes the circumstances of how an asset or liability is used. (IVS 104 p24 120.1)
The word “client” refers to the person, persons, or entity for whom the valuation is performed. This may include external clients (i.e., when a valuer is engaged by a third-party client) as well as internal clients (i.e., valuations performed for an employer). (IVS page)
The cost approach provides an indication of value using the 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. (IVS 105 p44 60.1)
The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties. (IVS 104 p21 50.1)
Fair Market Value (OECD)
The price a willing buyer would pay a willing seller in a transaction on the open market. (IVS 104 p23 100.1)
Fair Market Value (US IRS)
The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. (IVS 104 p23 110.1)
Fair Value (IFRS 13/ US ASC 820)
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (IVS 104 p23 90.1)
Circumstances where a seller is under compulsion to sell and that, as a consequence, a proper marketing period is not possible, and buyers may not be able to undertake adequate due diligence. (IVS 104 p25 170.1)
The income approach provides an indication of value provided by converting future cash flow to a single current value. (IVS 105 p36 40.1)
The use(s) of a valuer’s reported valuation or valuation review results, as identified by the valuer based on communication with the client. (IVS page 3)
The client and any other party as identified, by name or type, as users of the valuation or valuation review report by the valuer based on communication with the client. (IVS page 3)
The value of an asset to a particular owner or prospective owner for individual investment or operational objectives. (IVS 104 p22 60.1)
The word “jurisdiction” refers to the legal and regulatory environment in which a valuation engagement is performed. This generally includes laws and regulations set by governments (eg, country, state and municipal) and, depending on the purpose, rules set by certain regulators (eg, banking authorities and securities regulators). (IVS page 3)
The amount that would be realised when an asset or group of assets are sold on a piecemeal basis. (IVS 104 p22 80.1)
The market approach provides an indication of value by comparing the asset with identical or comparable (that is similar) assets for which price information is available. (IVS 105 p30 20.1)
Market Rent is the estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. (IVS 104 p21 40.1)
Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. (IVS 104 p18 30.1)
The word “may” describes actions and procedures that valuers have a responsibility to consider. Matters described in this fashion require the valuer’s attention and understanding. How and whether the valuer implements these matters in the valuation engagement will depend on the exercise of professional judgement in the circumstances consistent with the objectives of the standards. (IVS page 3)
The word “must” indicates an unconditional responsibility. The valuer must fulfill responsibilities of this type in all cases in which the circumstances exist to which the requirement applies. (IVS page 3)
The word “participant” refers to the relevant participants pursuant to the basis (or bases) of value used in a valuation engagement (see IVS 104 Bases of Value). Different bases of value require valuers to consider different perspectives, such as those of “market participants” (eg, Market Value, IFRS Fair Value) or a particular owner or prospective buyer (eg, Investment Value). (IVS page 4)
The word “purpose” refers to the reason(s) a valuation is performed. Common purposes include (but are not limited to) financial reporting, tax reporting, litigation support, transaction support, and to support secured lending decisions. (IVS page 4)
The word “should” indicates responsibilities that are presumptively mandatory. The valuer must comply with requirements of this type unless the valuer demonstrates that alternative actions which were followed under the circumstances were sufficient to achieve the objectives of the standards.
In the rare circumstances in which the valuer believes the objectives of the standard can be met by alternative means, the valuer must document why the indicated action was not deemed to be necessary and/or appropriate.
If a standard provides that the valuer “should” consider an action or procedure, consideration of the action or procedure is presumptively mandatory, while the action or procedure is not. (IVS page 4)
Significant and/or Material
Assessing significance and materiality require professional judgement. However, that judgement should be made in the following context:
- Aspects of a valuation (including inputs, assumptions, special assumptions, and methods and approaches applied) are considered to be significant/material if their application and/or impact on the valuation could reasonably be expected to influence the economic or other decisions of users of the valuation; and judgments about materiality are made in light of the overall valuation engagement and are affected by the size or nature of the subject asset.
- As used in these standards, “material/materiality” refers to materiality to the valuation engagement, which may be different from materiality considerations for other purposes, such as financial statements and their audits. (IVS page 4-5)
Subject or Subject Asset
These terms refer to the asset(s) valued in a particular valuation engagement. (IVS page 5)
Synergistic Value is the result of a combination of two or more assets or interests where the combined value is more than the sum of the separate values. (IVS 104 p22 70.1)
A “valuation” refers to the act or process of determining an estimate of value of an asset or liability by applying IVS. (IVS page 5)
Valuation Purpose or Purpose of Valuation
See “Purpose“.(IVS page 5)
A “valuation reviewer” is a professional valuer engaged to review the work of another valuer. As part of a valuation review, that professional may perform certain valuation procedures and/or provide an opinion of value. (IVS page 5)Value (n)
The word “value” refers to the judgement of the valuer of the estimated amount consistent with one of the bases of value set out in IVS 104 Bases of Value. (IVS page 5)
A “valuer” is an individual, group of individuals or a firm who possesses the necessary qualifications, ability and experience to execute a valuation in an objective, unbiased and competent manner. In some jurisdictions, licensing is required before one can act as a valuer. (IVS page 5)
The word “weight” refers to the amount of reliance placed on a particular indication of value in reaching a conclusion of value (eg, when a single method is used, it is afforded 100% weight). (IVS page 5)
The word “weighting” refers to the process of analysing and reconciling differing indications of values, typically from different methods and/or approaches. This process does not include the averaging of valuations, which is not acceptable. (IVS page 5)
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