Asset Valuation, Part I by Tamrat M.

SCHOOL OF COMMERCE
Asset Valuation
&
IFRS Conversion Project Office
Asset Valuation Training

Presentation PowerPoint
April, 2021
Addis Ababa
Part I
International Valuation Standards(IVSs)

&
The Regulatory Environment of IVSC
ኩሎ አመክሩ ወዘሰናየ አጽንዑ

AAU-School of commerce: Asset Valuation & IFRS-Project office
What and Why of Asset Valuation
1) Asset Valuation
• Asset valuation is the process of assessing the
value of a company, real property or any other
item of worth, in particular assets that produce
cash flows. Asset valuation is commonly
performed prior to the purchase or sale of an
asset or prior to purchasing insurance for an
asset.

What and Why of Asset Valuation, Cont’d…
• It is a process that uses different scientific

techniques in determining the value of an asset.
• The final output of the process is usually

communicated through a formal media called
Valuation Opinion/Report which is duly to be
signed by the professional valuer undertaken the
process.

What and Why of Asset Valuation, Cont’d…
2) Why Asset Valuation?
At any point in time, businesses and individuals may want to determine the value
of an asset for different purposes. Common purposes include (but are not limited
to):
financial reporting,
tax reporting,
transaction support(for buying & selling ,including privatization) ,
litigation support & also inheritance,
to support secured lending decisions,
Merger and Acquisition
Etc…
NB: - The purpose of the value dictates the basis and approach to be used by the valuer
-The basis we select and the approaches we apply should come from acceptable international
valuation standards and the framework therein.
Do we need Standards for Asset
Valuation?
What is a standard?
• Generally it is agreed that a standard is a level of
quality or achievement, especially one that people
generally consider normal or acceptable. Standards
are essential to determining how well a person
follows legal, professional and ethical norms.
• Dictionaries Meanings:
- “An acknowledged measure of comparison”
-“A standard is something established by authority,
custom or general consent as a model or example; a
criteria”
Valuation?, Cont’d…
Considering the form of appearance a standard
may either measure a quantitative number or
amount, or a qualitative level of performance.
In most professions, standards are developed
from best practices through the accumulation of
knowledge and skills over time.
They are considers as a minimum threshold to
judge whether a given activity is accomplished to
an acceptable level.
Valuation?, Cont’d…
Development of standards in the valuation
profession
Since long valuers exist in all cultures, even if they
are not officially recognized as such. Wherever
value exists, an opinion of value also exists.
When valuers are more formally organized,
recognized methods are developed and
subsequently valuation standards arise. These
standards could be national or international.
Valuation? Cont’d…
• Regarding the usefulness of valuation standards
there are four important categories which need
valuation standards:
1)Valuers which are interested to enhance the
reliability of valuations (in accordance with
recognized standards). On the other hand
valuation standards represent a means of
advertising of the service quality and also a way
for protection for new entrants.
Valuation? Cont’d…
2) Clients initially consider the quality of a valuation report in
accordance with owns objectives: less taxes, finding a good loan
etc. At the end they are comfortable and they agree the
valuer’s opinion if they know that valuers follows valuation
standards.
3) Authorities are responsible for good economic framework,
avoiding frauds (ex privatizations) etc.. Valuation standards
could solve a “hot potato” issue; standards are good because
it’s a chance to blame valuers or the poor standard quality.
4)General Public is not so interested in such kind a technical

issue. The view is different when something wrong happened
(ex. bank failure); in this case they’ll ask for the quality of
services and create a pressure for valuation standards.
Why should we have International
valuation Standards ?
• The worldwide trend towards globalization of
businesses has pushed the need for International
standards in every sector of business.
IAS/IFRS
ISA
Families of an ISOs
• For the Appraisal and Valuation profession it has lead
to the introduction of International Valuation
Standards IVS.
• IVSs are developed by IVSC
Historical Development of IVSC
• How is IVSC created?
• How is it Governed?
• Who are the members?

IVSC Creation & Governance
• Before coming to existence of IVSC, there were so
many valuation organizations(VOs) in different
countries:
In Europe in 1977 was founded The European Group
Valuers of Fixed Assets (TEGVOFA) which was replaced
in 1992 by EUROVAL and 1997 by The European
Group of Valuers Association (TeGOVA).
In 1981, The European Group of Valuers Association

(TeGOVA) developed European standards and
guidance, known as “Blue Book”.
IVSC Creation & Governance, Cont’d…
• In United Kingdom, Royal Institute of Chartered
Surveyors (RICS) initiated the development of an
improved set of standards in the U.K. following
the 1974 property crash.
• RICS was published a new set of standards in
1976 under the name “Guidance Notes on the
Valuation of Assets”, a document became known
as the “Red Book”.

• In USA Uniform Standards of Professional
Appraisal practice (USPAP), developed by the
Appraisal Standards Board of the Appraisal
Foundation(TAF).
• On the other hand there are few important

professional institutes which promote valuation
standards include(AI, ASA, CCIBV, AIPV etc.)

• In actual context the major question for valuation
profession is: “What to choose? the “Red Book”,
USPAP, EVS (the “Blue Book”) or developing
national/ regional standards?”.
• Actual status of valuation profession and practice
is fragmented and not so consistent from global
market perspective. In contrary, the global market
is becoming more integrated than ever before.

• Globalization of business and growth of cross-border
markets needs common rules to ensure “fair play”.
That means that reliable reporting of asset values
and liabilities is important to analysis of business
performance across borders.
• Also, there is an increasing pressure from
governments, independent regulators and investors
to standardize the practice of valuation
internationally. This is mainly in search of
consistency, transparency and credibility in the
valuation reporting.
IVSC Formation
• At the beginning of the modern globalization
process, the International Asset Valuation
Standard Committee (TIAVSC) was founded in
1981 with initial membership of 20 countries.
• In 1984 the first set of standards was launched.
Ten years later, the first formal set of valuation
standards were published under the renamed
TIAVSC of the International Valuation Standard
Council (IVSC).
IVSC Formation, Cont’d…
• The IVSC expanded during the 90s and early 00s
to include institutes dealing with business
valuation.
• In 2008 the IVSC was transformed and
restructured to move away from an “organization
of organizations” model to a model consisting of
independent boards (Standards and Professional)
under oversight of a Board of Trustees.

Who is IVSC ?
• The International Valuation Standards Council (IVSC) is an
independent, not-for-profit organization committed to
advancing quality in the valuation profession.
• The primary objective is to build confidence and public

trust in valuation by producing standards and securing
their universal adoption and implementation for the
valuation of assets across the world.
• It is believed that International Valuation Standards (IVS)

are a fundamental part of the financial system, along with
high levels of professionalism in applying them.
The IVSC – Organization Chart

IVSC Board of Trustee
Board of Trustees
 The Board of Trustees will consist of a Chair and up to 14 other individuals with
the combined skill, knowledge and experience required.
 Purpose and Authority to:
– Set and monitor the IVSC strategy to create and implement IVSs in conjunction with
the valuation profession and related stakeholders
– Initiate discussions to ensure/secure and ongoing funding for the IVSC
– Approve decisions related to resource allocation
– Represent the IVSC and help achieve recognition of International Valuation
Standards
– Set the terms, remit and provide oversight and guidance to the executive staff of the
IVSC and the Boards
– Appoint members of the Standards Board
– Oversee performance of the Secretariat, Standards Board Chair and Membership &
Standards Recognition Board Chair
– Ensure that Standard setting follows due process
– IVSC Governance
The Chairman
• Represents IVSC publicly in particular with key
international standard setters, regulators,
financial institutions and governments
• Provides oversight and guidance to CEO from a
governance and strategy perspective
• Provides leadership to the Board of Trustees in
setting the strategy, and driving forward funding
and recognition for IVSC
 CEO
– Represents IVSC publicly in particular with key international standard
setters, regulators, financial institutions and governments on issues of
strategy, policy, and operations
– Works with the Trustees to develop and implement strategy, performance
targets and plans for board approval
– Is accountable to the Trustees on the execution of the strategy
– Leads and manages staff
– Focuses on achieving adoption and recognition of standards, including the
management of the relationships with global and national regulatory
bodies and key stakeholders and members
– Manages finances of the organization, including assisting in the funding of
the IVSC
– Helps achieve funding goals
– Makes day to day decisions on non-technical matters (in liaison with Chair
as needed)

The CEO is assisted by the following permanent
and part time staffs:
– Standards Quality Director
– Seconded Staffing (part time)
• Tangible Assets Specialist Director
• Business Valuation Specialist Director
• Financial Instruments Specialist Director
– Recognition and Communications Director
– Finance and Admin Manager
– Standards Support Manager
Standards Review Board
 The Standards Review Board will have a separate Chairman and up to 6 other
members including 3 independent generalist valuation members plus the Chair
of each subject matter expertise board.
• The Standards Quality Director will attend but not have a vote
 Purpose
• Through ongoing consultation, write and approve International Valuation
Standards.
• Have the necessary combined knowledge, experience, skills – both technical
and communication – to ensure the quality, level and appropriateness of IVSs.
• Be independent and act in the public interest. Neither the Board nor individual
members will represent any specific region, sector or organizational interest but
membership of the board will come from a variety of technical and geographic
backgrounds.
• Ensure IVSs add value and can be implemented by valuation professional
organizations.
• Help achieve stakeholder recognition of IVS.
Technical Boards
 Under the Standards Review Board there are three
technical/subject matter expertise boards of:
– Tangible Assets Standards Board (Covering Real Estate, Plant &
Machinery, Personal Property. 5 members plus non voting
Tangible Assets secondee Director);
– Business Valuation Standards Board (5 members plus non
voting BV secondee Director); and, at the appropriate time:
– Financial Instruments Standards Board (5 members plus non
voting FI secondee Director)
• Subject specialists will form the subject matter expertise
boards and working groups leveraging VPO knowledge will
work on a project basis to propose changes to IVS;
Membership & Standards Recognition
Board
 Members and Structure
• Elected VPO representatives should form the board. These representative VPOs will be
specifically responsible for ensuring the partnership and teamwork between VPOs and
the IVSC
 Purpose to:
– Leverage the former Professional Board framework defining professionalism in the
valuation profession. Champion the framework and help the profession in
developing markets;
– Confirm Members of the IVSC ie. VPOs that meet Membership requirements (VPOs
which do not meet the requirements may become Associate Members);
– Encourage the development of an internationally agreed professional designation
for each of Tangible Assets, Business Valuation and, eventually Financial
Instruments. The international designation would be issued by the confirmed
members and identify the quality practitioners who comply with IVS and belong to a
full member VPO;
– Lead and ensure market recognition of the IVSs;
– Ensure the positive partnership and teamwork between the IVSC and valuatio
profession;
– Work with IVSC towards one set of agreed set of high quality standards.
Advisory Forum
 A monthly forum for VPOs to meet virtually to:
– Focus on better meeting the needs of end users of valuations
– Discuss common issues and a channel to share best practice
– Use VPO specialists to interact in a co-ordinated way with
relevant Standards Board sections
– Engage with the Membership & Standards Recognition Board
– Strengthen the global valuation profession
– Play a key role in development and adoption of International
Valuation Standards

The Due Process

IVSC Publications
• The IVSC has undertaken eleven revisions of the
International Valuation Standards, which were
published in 1985, 1994/97, 2000, 2001, 2003,
2005,2007,2011, 2013 and 2017.
• The final version which is currently in
use is the 2017 edition.
You will find this edition from their website: ivsc.org

IVSC Members
Currently, IVSC has members from more than
100 countries.
It has three types member:
Professional Valuation Organizations(PVOs)
Corporate Members
Academic Members
In addition, IVSC has many international
organizations officially listed as its sponsors.
Please see the next three slides for full member list

END
Thank You


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SCHOOL OF COMMERCE

Asset Valuation Training

International Valuation Standards(IVSs)

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

• It is a process that uses different scientific

• The final output of the process is usually

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

4)General Public is not so interested in such kind a technical

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

In 1981, The European Group of Valuers Association

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

• On the other hand there are few important

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

• The primary objective is to build confidence and public

• It is believed that International Valuation Standards (IVS)

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

ኩሎ አመክሩ ወዘሰናየ አጽንዑ

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