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IVSC report on valuations under IFRSs

31 Mar 2007

The International Valuation Standards Committee (IVSC) has reviewed the first audited IFRS financial statements of 59 leading European property investment companies from 13 countries to assess the degree of consistency in valuation reporting of real estate assets under IAS 40.

The IVSC's findings were published in a report titled Valuation Under International Financial Reporting Standards(PDF 74k). The companies included in the survey are all members of the European Public Real Estate Association. The great majority chose to account for their investment property under IAS 40 at fair value through profit or loss, rather than IAS 40's alternative cost-depreciation-impairment model. Some of the key trends that emerged from the review were:
  • A rapidly growing use of the International Valuation Standards (IVS). Of those companies who disclosed that the valuation was carried out according to certain valuation standards, 36% referred to the IVS; 38% to the RICS 'Red Book';
  • If UK companies were excluded, 40% of companies referred to use of the IVS; 24% to the RICS 'Red Book';
  • In all, ten difference sets of valuation standards/guidance were quoted as having been used;
  • Just under half of the companies surveyed reproduced a definition of Market Value or of Fair Value within their financial statement. Only 34% accurately reproduced either the IVS definition of Market Value (also adopted by the RICS) or the IASB definition of Fair Value.