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IVSC publishes exposure draft of guidance on different bases of value

  • IVSC (International Valuation Standards Council) (lt green) Image

08 Jan 2014

The International Valuation Standards Council (IVSC) has published an Exposure Draft (ED) of guidance and illustrative examples to assist practitioners with the application of the valuation bases discussed in the International Valuation Standards (IVS) Framework.

The different bases of value contained within the IVS Framework are: 

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;

Investment value is the value of the asset to the owner or a prospective owner for individual investment or operational objectives; and

Fair value is 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. 

The IVS Framework also defines Special Value and Synergistic Value which are a component of one or more of Market Value, Investment Value or Fair Value. 

Synergistic Value is an additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.

Special Value is an amount that reflects particular attributes of an asset that are only of value to a special purchaser

The guidance and illustrative examples have been published to assist practitioners to better understand the concepts within the IVS Framework “by illustrating their application in various scenarios”.  The examples also identify the differences between the IVS bases of value.  

The guidance and illustrative examples do not form part of the International Valuation Standards (IVSs).  

The IVSC expect to publish further guidance on other areas in the near future and have requested that respondents rank the other areas in order of perceived priority. 

Comments on the ED are invited until 31 March 2014. 

The ED, ‘Chapter 1 – Bases of Value’ can be obtained from the IVSC website.

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