Valuation Standards Research Articles

A Modified UK Real Value/Short-Cut DCF Model for the Valuation of a Nigerian Sub-Leased Commercial Property

A UK real value/short-cut DCF model that addresses the valuation of geared profit rents generated by sub-let commercial investment properties especially in climes with nationalized land policy has been elusive. This study examines the modification of the extant UK real value/short-cut DCF model for the valuation of head-leased occupancy rights with fixed and non-revisable ground rents pursuant to the provisions of the Nigeria Land Use Act. The model is developed by blending the inputs of the modified rational model with that of the Crosby's real value/short-cut DCF model leading to a valuation model that appears simplified compared to the existing UK contemporary value models. The gearing effect for the hypothetical case of sub-let head-lease occupancy right in Nigeria is manifested as having a diminishing impact of fixed ground rent on profit rent calculation. For the valuation case study involving this hypothetical head-leased occupancy right in Nigeria, it was found that the modified UK real value/short-cut DCF model produced valuation that is identical to those churned out from the full DCF, modified rational, and Crosby's real value/short-cut DCF models. For the same hypothetical case study, less than 1% difference is observed between valuations from the all risks real yield (ARRY) model, which evolved in New Zealand and the valuation produced from the modified UK real value/short-cut DCF model, thereby validating all methods against each other. In consonance with the International Valuation Standards pertaining to income valuation approach, a sustained pedagogy of emerging real value models alongside the extant nominal valuation models is suggested as a way forward. Nevertheless, the modified UK real value/short-cut DCF model is recommended as an alternative to the extant variants of real value and explicit DCF techniques for the valuation of sub-let head-lease occupancy rights with fixed/non-revisable ground rents payable especially in climes with nationalized land policy.

Legal nature of the ivsc international standards

The article is focused on legal nature of International Valuation Standards Committee (renamed to International Valuation Standards Council in 2008) and implementation of its valuation standards by states and international organizations. The paper concentrates on legal gaps regarding the application aspects of property value calculations in international law. Treaties do not provide substantial determinacy, include no instruction or the appropriate methodology on numerous calculation issues and typically set forth only basic standard of valuation such as standard of fair market value of property for the calculation of compensation. It shows that lack of standards for determining awards of compensation creates a source of uncertainty for protection in international public law. The issue discusses a framework where international valuation standards of international non-governmental organizations are given legal weight and serve as guidelines for the calculation of awards. After establishing the legal basis for an award, tribunals use their impression of valuation best practices as well as discretion to conduct the analysis. The result depends on the assumptions and philosophy of the adjudicating tribunal. It is emphasized that international arbitration practice in measures of compensation should be based on principles of fairness and reasonableness.
 Part of the issue is based on Directive of European Union with provisions that valuation standards of states should take into account internationally recognised valuation standards, in particular those developed by the International Valuation Standards Committee, the European Group of Valuers’ Associations or the Royal Institution of Chartered Surveyors. Member states of European Union admitted valuation standards of international non-governmental organizations as reliable standards for the credit purposes after the financial crisis, which has shown that irresponsible behaviour by market participants can undermine the foundations of the financial system leading to potentially severe social and economic consequences.

International Valuation Standards Council Defined Jurisdiction Affect on the Benefit Conferred and Financial Contribution

As the expectations can be predicted as performance in the market a fair value predictions on risk reward models for balance sheet financial statements offers evidence to the legal and regulatory environment and to the investor(s) that gain or loss is realized. These effects on consumer choice, buying power, and overall knowledge of the investor can then be used to assess market value based on the International Valuation Standards Council defined jurisdiction affect on the benefit conferred and financial contribution within the United States and according to the United States Code as regulatory policy.

CONCEPTUAL ASPECTS AND THE MOST USED PRACTICES IN OBTAINING THE RELIABILITY OF ENTITY VALUE ESTIMATION

Estimating the entity value is topical and of particular interest to managers and business owners, who in turn hope that through the evaluation they will obtain parallel and new possibilities for the business remediation. In this context, managers seek the support of qualified assessors, who will conduct a thorough analysis of the entity’s state at a given date, will apply the most effective evaluation methods. In this paper we proposed to investigate and analyze the theoretical aspects of the entity value estimation (EVE), rendered in the opinion of the well-informed researchers and in the light of the evaluation standards. As a result, we note that the criteria of evaluations have been supplemented with the following criterion: by type of activity of the economic entity. We estimate the evaluation methods in order to identify the most accepted and effective method for this important process to the entity. For the practical aspect of the investigation, we focused on the method of comparison in the market valuation of the enterprise, in order to establish the statistical indicators consisting of the calculation of the median and the arithmetic mean. Based on the calculations made in the practical part, we have found that an economic entity can change its own value, in particular, by the way its values are profitable. In estimating the value of the entity, a decision-making function is attributed to the rests with the assessor, in particular with regard to the methods selected and applied professionally by the entity, in compliance with professional valuation standards and current regulations, as the fair estimation of the entity’s value leads to a secure future and a guaranteed success.

Analisis Kinerja Keuangan Bank Umum Syariah Melalui Pendekatan Islamicity Performance Index

This study aims to determine how the financial performance of Islamic commercial banks in Indonesia through the islamicity performance index approach for the period 2013-2017, by the principles of justice, halalness, and purification. This study using quantitative descriptive research. The number of banks sampled are five Islamic commercial banks in Indonesia that have been selected, through a purposive sampling technique first. These banks are BRI Syariah, BNI Syariah, Mandiri Syariah, BCA Syariah, and Victoria Syariah. The type of data used is secondary data taken from the financial statements of each islamic commercial bank that is sampled. Through the islamicity performance index approach, the results of this study indicate that the financial performance of islamic commercial bank is unsatisfactory, based on the average of the variables that have been processed in accordance with predicate valuation standards.

On the definition of fair value for purposes of IFRS

Subject. This article discusses the issue of defining the Fair Value concept, its similarity and identification with the concept of Market Value. It examines the specifics of each particular value, defines the concept of Fair Value, and analyzes approaches (methods) of fair value valuation, clarifies existing problems of determining fair value for the purposes of IFRS application. Objectives. The article aims to define the notion of Fair Value and appropriate use in accounting, as well as explore approaches to assess fair value. Methods. For the study, we used a comparative analysis. Results. The article says of many inconsistencies in the valuation of fair value, starting with the lack of a clear definition of fair value in IFRS, which is actually identified with the concept of market value. It proposes a refined definition of fair value and identifies fundamental differences between fair and market values, which are based on the procedures used in their assessment. Conclusions. Fair and market values are two different types of valuation. Fair value can be the same as market value, but only if there is an active market available. There is no single concept of Fair Value presented in scientific and special literature. The same approaches are used in fair (IFRS) and market (valuation standards) assessments, but the methods described for each approach are not always the same.

Модель объема ствола ивы: мета-анализ

Current scenarios of the consequences of global warming stimulate research on the carbon-depositing capacity of vegetation cover. The stem is the main part of the tree biomass, and the accuracy of its volume assessment determines the possibility of correct monitoring and forecasting of forest resources. In the Russian forest management system, willow was not among the main forest-forming species, and therefore there was no need to develop valuation standards for it. However, due to the increased relevance of assessing the carbon-deposing function of Russian forests and the requirement to take into account the contribution to the carbon balance of all types of vegetation, there is a necessity to develop such standards. The solution can be found in the development of a generic model (or table) that takes into account the morphology of willows within the Salix L. genus and is based on data published in different regions and countries. The object of our research is data on the volume of willow stems, which is published and freely available in Russia, Kazakhstan, Bulgaria, and Norway in the form of tables or regression models. However, the extent to which each local model is applicable in other regions is unknown. To resolve this uncertainty, we used meta-analysis as a statistical procedure that combines the results of several independent studies in order to find a common pattern. As a result, we obtained a generic model of stem volume for the Salix genus, which is characterized by a high coefficient of determination and can be applied to estimate the stem volume of any species of this genus with minimum deviations from the calculated values. The results of the work are aimed at improving the accuracy of accounting deciduous stands during forest management and monitoring activities, valuation of stands on permanent and temporary trial plots. The implementation of unified standards for the use, reproduction, conservation and protection of willow stands with all the diversity of its species will solve a number of practical issues. For citation: Usoltsev V.А., Paramonov А.А., Tretyakov S.V., Koptev S.V., Tsepordey I.S. Generic Model of Willow Stem Volume: A Meta-Analysis. Lesnoy Zhurnal [Russian Forestry Journal], 2021, no. 3, pp. 49–58. DOI: 10.37482/0536-1036-2021-3-49-58

Features of determining the market value of retail real estate and individual trade related properties during pre-trial evaluation and forensic examination

The present article deals with the specifics of valuation of retail property and individual trade related properties on the basis of the international experience and as recommended by International Valuation Standards and RICS (The Royal Institution of Chartered Surveyors (Great Britain)) valuation standards (Red Book). The present article is justified as currently Russia lacks a standard, uniform for the valuers or legal experts, to be used for the purposes of valuation of similar subjects. At the same time, methodical literature is insufficient while there are numerous property disputes that call for pre-court valuations and expert evidence of valuation of such subjects, including numerous litigations arising out of bankruptcy or establishing cadaster value to the amount of market value. The author reviews the existing approaches to valuation of real estate in accordance with both the international and national standards and awards professional recommendations pertaining to the use of the income approach to value retail real properties and individual trade related properties. The definitions and metrics of the above real properties’ groups are described separately. Also, the author provides guidelines for inquiry of the documents and information necessary for the acquisition of the data to be used in the course of valuation and expert evidence. All pricing factors are described in detail in the present article against the examples of retail real properties and individual trade related properties (say, hotel) and explanation of their effect on the market value in case the income approach is applied is provided.

Defining the Fair Value concept for IFRS application

Subject. This article discusses the issue of defining the Fair Value concept, its similarity and identification with the concept of Market Value. It examines the specifics of each particular value, defines the concept of Fair Value, and analyzes approaches (methods) of fair value valuation, clarifies existing problems of determining fair value for the purposes of IFRS application. Objectives. The article aims to define the notion of Fair Value and appropriate use in accounting, as well as explore approaches to assess fair value. Methods. For the study, we used a comparative analysis. Results. The article says of many inconsistencies in the valuation of fair value, starting with the lack of a clear definition of fair value in IFRS, which is actually identified with the concept of market value. It proposes a refined definition of fair value and identifies fundamental differences between fair and market values, which are based on the procedures used in their assessment. Conclusions. Fair and market values are two different types of valuation. Fair value can be the same as market value, but only if there is an active market available. There is no single concept of Fair Value presented in scientific and special literature. The same approaches are used in fair (IFRS) and market (valuation standards) assessments, but the methods described for each approach are not always the same.

Applicability of Databases in the Real Estate Valuation Process in the Conditions of the Emerging Economy of the Republic of Moldova

The real estate valuation activity in the Republic of Moldova dates from 2002, with the adoption of Law No. 989 on Evaluation Activity. Nevertheless, the legislative and methodological framework is extremely limited. There are no national professional standards. Meanwhile, the situations that require real estate valuation are multiplying and diversifying. Therefore, the valuers apply the provisions of the International Valuation Standards (IVS) and of the European Valuation Standards (TEGoVA) adapting them to the national realities by virtue of their knowledge and experience. Information stored in databases plays an important role in the real estate valuation process. In this paper, the authors analyse the content of existing databases in the Republic of Moldova (the databases of normative documents, the information system for the cadastre of real estate, the statistical databases, and specialized databases), the quality of the included information, as well as the applicability of that information in the real estate valuation process. The disadvantages, limitations and shortcomings of databases are highlighted, and measures are proposed to increase their usefulness.

THEORETICAL BASIS OF DETERMINING THE MARKET VALUE OF INTELLECTUAL PROPERTY OBJECTS IN FORENSIC EXAMINATION

The article reveals the general theoretical aspects of conducting economic forensic research in the area of intellectual property. The subject, objects and tasks of forensic examination of economic research in the field of intellectual property are revealed. The directions and types of economic researches in the area of intellectual property, their peculiarities and problems are analyzed. Particular attention is paid to economic research related to infringements of intellectual property rights. The economic essence of intellectual property valuation and the purpose of this valuation are studied. The necessity of determining the market value of intellectual property objects is substantiated. The goals of estimating the market value of intellectual property rights are determined. A theoretical study of the concept of market value of intellectual property is conducted. The types of value of intellectual property objects are determined in accordance with international standards. The main directions and tasks of forensic activity in the field of intellectual property are systematized. The author singles out four main groups of intellectual property objects: objects of copyright, objects of related law, objects of industrial property (the right to means of individualization of participants in civil turnover, goods and services), and non-traditional objects. The types of intellectual property objects from the standpoint of current legislation are considered and characterized. The systematization of legislative acts of Ukraine related to the protection of intellectual property rights and conducting of economic research has been completed. It is shown that use of intellectual property rights is regulated by a number of legal and methodological documents. The main of them are Codes, Laws of Ukraine, international and national valuation standards, as well as resolutions of the Cabinet of Ministers of Ukraine, orders of the State Property Fund of Ukraine, and orders of the Ministry of Finance of Ukraine. The main methodological approaches and methods of assessing property rights are named. Revenue, comparative and cost methodological approaches and the residual method are used to assess the intellectual property rights. The order and conditions of substantiation by the forensic expert of expediency of application within the limits of each of methodical approaches of this or that method of estimation are specified.

The future for the replacement cost in the International Public Sector Accounting Standards

The purpose of this paper is to review academic literature and professional practice guidance in relation to the replacement cost (RC) method of valuation in public sector financial accounting. The replacement cost is regarded as being the most appropriate basis for the determination of fair value when the fair value of the asset could not be reliably determined using market-based evidence (Wyatt, 2009). However, several problems persist in RC definition and application, underlining the lack of a uniform approach in the current valuation standards. The paper explores the current adoption of RC by performing a content analysis of the latest financial statements published by International Public Sector Accounting Standards (IPSAS) adopter jurisdictions across the globe. The analysis highlights interesting patterns in the use of RC and provides an empirical base for further investigations. Additionally, the research offers useful insights to stimulate professional and academic debate on the replacement cost method, particularly in view of amendments proposed by the recently published Exposure Draft.

Administrative Decisions in the Era of Artificial Intelligence

The rapid development of cybernetics allows the use of artificial intelligence in many areas of social and economic life. The State can also harness algorithms and machine learning for its actions. Automatic decision making should be one of the stages in the development and improvement of public administration. While it is easy to implement these solutions in the case of related decisions, decisions made under administrative discretion, general clauses or valuation standards pose a challenge. The correct transformation of paper-based public administration into automatic public administration requires a change in decision makers’ thinking, the introduction of new solutions, and building trust in artificial intelligence. Therefore, new solutions have to be built in accordance with the principles of transparency, accountability, equality, goodness and justice. Artificial intelligence making automatic decisions on behalf of the State must be a tool to support the execution of public tasks concerning citizens which is based on trust towards AI and public administration.

Pricing to market: property valuation methods – a practical review

PurposeValuation is the process of determining Market Value. Property valuation, as with the valuation of all assets, is an estimation of price in the market. It is value in exchange. The valuer role is to determine the appropriate approach, the method and use the right model to achieve this aim as best as possible. It is a combination of analysing the market and determining the critical variables for the valuation method/model. The method is separate from the valuation process which should be followed (according to the International Valuation Standards Council Valuation Standards) regardless the valuation method chosen. There are valuation approaches, valuation methods and, as a subset of the methods, techniques or models.Design/methodology/approachThis practice briefing is an overview of the Valuation Methods and Models available to the valuer and comments on the appropriateness of valuation each in assessing Market Value for specific property types.FindingsThis briefing is a review of the valuation methods and models and models that can be applied to determine market value.Practical implicationsThe role of the valuer in practice is to identify the method of valuation and then apply the correct mathematical model for the valuation task in hand.Originality/valueThis provides guidance on how valuations can be presented to the client in accordance with the International Valuation Standards.

Financial ratio analysis to Assess the Performance of Telecommunications Companies Listed on the Indonesia Stock Exchange 2017-2019

<em>This study aims to assess the company's financial performance using financial ratio analysis of Telecommunications companies listed on the Indonesia Stock Exchange 2017- 2019 period. The sampling technique used was purposive sampling so that selected in this study PT Telekomunikasi Indonesia (Persero) Tbk, PT XL Axiata Tbk, PT Indosat Tbk and PT Smartfren Tbk, The type of data used in this study is secondary data which includes data on annual financial statements from 2017 to 2019. The analysis tool use the analysis of liquidity ratios, solvency and profitability. The results of the study were reviewed from the liquidity ratio using the current ratio and quick rasio, then the highest level of ratio obtained from 2017 to 2019 was PT Telekomunikasi Indonesia (Persero) and the lowest was PT Smartfren Tbk, however, the four companies produce ratios from 2017-2019 under the ratio valuation standard. This shows that the company's performance is not healthy because the company is unable to guarantee its current debt with its total current assets (liquid). The solvency ratio from the calculation debt to asset ratio shows that PT Telekomunikasi Indonesia (Persero) Tbk has the lowest ratio compared to other companies from 2017 to 2019, but out of all of the surveyed telecommunications companies show the results of the ratio exceeds the standard solvency ratio so the company is in a bad condition. Having a solvency ratio that is getting higher every year is feared that the company will not be able to guarantee long-term debt with the total assets it has (insolvable). Profitability ratios generated in telecommunications companies that were studied by calculating economic profitability/ return on investment and profitability of their own capital/ return on equity showed that the performance of companies that experienced a decline in profits from 2017 to 2019, even Smartfren suffered losses for three years in a row. This shows the company's performance in a bad condition</em>

Determining Economic Security of a Business Based on Valuation of Intangible Assets according to the International Valuation Standards (IVS)

This work considered the economic security of an enterprise with regard to the valuation of intangible assets according to the International Valuation Standards (IVS). This study is essential due to a growing number of companies with intangible assets (trademarks, patents, know-how, etc.) as their main value. This study included analysis of the impact created by the value of intangible assets and intellectual property on company capitalization and economic security plus a regression model. An algorithm was developed to determine the economic security of a business based on the valuation of intangible assets according to the IVS. The suggested algorithm can allow a company to manage its intangible assets effectively using the IVS, which, in turn, will provide the required level of economic security for further development and achievement of strategic goals by the business entity.

Development land valuation accuracy in China – a case study of Beijing

PurposeThe paper aims to quantitatively investigate vacant industrial land valuation accuracy in China, given the importance of the industrial market as an underlying pillar to promote urban growth especially in emerging economies.Design/methodology/approachIn China, the government formulates a Land Benchmark Price (LBP) to serve as a price reference point to sell land rights. To gain an in-depth understanding of the valuation practice by LBP, this paper uses correlation analysis to investigate the varying dynamics between the transaction-based prices and LBP appraisal-based estimates. Furthermore, a margin of error examination investigates the distortion in LBP land appraisals, with an amended LBP presented to improve the accuracy of the current LBP method.FindingsDifferent influencing factors are identified to impact the actual market transaction prices and the LBP construction, leading to a large discrepancy in industrial land appraisals. A systematic problem is recognised that the construction of the LBP follows urban bid curve theory, whereas the land transaction prices do not, demonstrating that an urgent LBP update is needed to capture the market dynamics for industrial market.Practical implicationsThe paper sets out discrepancies in valuation accuracy surrounding the application of the LBP valuation approach in China. This has practical implications for valuers in terms of raising their awareness of the deficiencies in the approach and the pitfalls they need to guard against in their appraisals. It also has implications for developers and investors who rely on valuer appraisals to assess the viability of land purchases; hence, they need to express caution in the appraisal advice sought. Finally, the results demonstrate to the standard setters how they need to modify the LBP equations to better capture market dynamics.Originality/valueThe paper examines valuation accuracy in transitional economies, through valuation differentials between appraised price and the transacted price. The value of the work lies in the analysis of the fundamental differentials between market price and appraised value, which is of importance to investors/developers, practicing valuers, as well as government officials responsible for setting the valuation standards.

Una alternativa multicriterio a la valoración de empresas: aplicación a las Cajas de Ahorro

En numerosas ocasiones las metodologías de valoración usualmente empleadas presentan dificultades en su aplicación a la valoración de empresas, bien porque el valorador no dispone de suficientes datos para utilizar los métodos comparativos tradicionales, bien por la dificultad de estimar los flujos de caja futuros con objetividad. Ante esta problemática, el presente trabajo propone una alternativa que combina el método multicriterio CRITIC con el Ratio de Valoración de las Normas Internacionales de Valuación. La nueva metodología se inserta dentro de los métodos comparativos o de enfoque de mercado y requiere únicamente disponer de un número reducido de empresas comparables. En este trabajo se ha aplicado a la valoración de una caja de ahorros. La valoración de este tipo de instituciones financieras, por la situación actual del sector, es un cometido de gran interés y constituye además un ejemplo muy ilustrativo para mostrar las fortalezas de la metodología propuesta.

Automated Valuation Methods through the Cost Approach in a BIM and GIS Integration Framework for Smart City Appraisals

The principle behind sustainable city movements is represented by the idea of “good living”, which is the possibility of having solutions and services that allow citizens to live in an easy, simple, and enjoyable way. Policies for urban quality play a central role in the slow cities manifesto, often suggesting the use of Information and Communication Technologies (ITC) in the development of interactive services for citizens. Among these, an interesting possibility is to offer citizens digital real estate consultancy services through the implementation of automated evaluation methods. An automated appraisal action—which is already complex in itself owing to the need to collect data in a consistent, standardized, but also differentiated way so as to require the adoption of real estate due diligence—collides on the operational level with the concrete difficulty of acquiring necessary data, much more so since the reference market is dark, atypical, and viscous. These operational difficulties are deepened by the epistemological nature of the appraisal discipline itself, which bases its methodology on the forecast postulate, recalling the need to objectify as much as possible the evaluation from the perspective of an intersubjective sharing argument. These circumstances have led, on the one hand, to the definition of internationally accepted uniform evaluation rules (IVS, 2017) and, on the other, to the testing of automated valuation methods aimed at returning computer-based appraisals (AVM). Starting from the awareness that real estate valuation refers essentially to information and georeferences, this paper aims to demonstrate how real estate appraisal analysis can be further improved through information technology (IT), directing real estate valuation towards objectivity in compliance with international valuation standards. Particularly, the paper intends to show the potential of combining geographic information systems (GISs) and building information models (BIMs) in automated valuation methods through the depreciated reproduction cost. The paper also proposes a BIM-GIS semi-automatic prototype based on the depreciated reconstruction cost through an experimentation in Rende (Italy).

Benefits of the ecosystem services provided by urban green infrastructures: Differences between perception and measurements

Urban green infrastructures (UGIs) are being increasingly recognized as key providers of ecosystem services (ES) in cities. However, many developing countries still lack the public awareness of the concepts of UGIs and their ES, including the benefit & monetary value of the UGIs’ services, the willingness to pay (WTP) for the UGIs’ services. The relationship between the benefits & monetary value of and the WTP for the services of UGIs has not been extensively investigated. These two aspects were respectively defined as ES supply and as ES demand in the current study, in which their relationship was scientifically described. Meanwhile, the influential factors of the deviation between ES supply and ES demand were explored. Adopting Guangzhou City (China) as a case, the main ES supply of UGIs in three public green spaces including air pollutant removal, daytime temperature reduction, rainwater runoff regulation, and noise abatement was first assessed with field measurements. Further, the main ES demand including people’s preferences, satisfaction, and WTP for the UGIs’ ES was analyzed with survey and statistical analysis. In total, 405 valid questionnaires were distributed to collect the data of ES demand and were analyzed by the nonparametric Kruskal-Wallis H test and a binary logistic regression model. The monetary valuation was used to unify the benefit valuation standards provided by different ESs, so as to more intuitively reflect the contribution of different ESs and compare these with ESs demand which uses WTP as one of the indicators. The results showed significant differences between ES supply and ES demand. The major evidence was that the regulation services could supply most of the ES benefits, while the cultural services were the most demanded by respondents. People had diverse sensitivity to the different types of ES provided by the UGIs. Cultural services were the most easily perceived by the respondents and considered as the top one, followed by regulation services. In addition, the outcome of the survey revealed different criteria regarding ES demand by people, and varying influencing factors for people’s satisfaction and WTP. Benefits, such as education opportunities, entertainment, and health values provided by UGIs in cultural services were more favored by respondents. Last, the statistical analysis confirmed that sociodemographic factors significantly influence people's WTP. This study suggests that UGIs should be oriented towards multifunctional construction, thereby emphasizing the relationship and balance between ecological integrity and social perception.