Global Standards 2021 (Red Book Global)

Question 1

When did red book come into effect?

Answer 1

31st Jan 2022

Question 2

Descibe the contents of the Red Book

Answer 2

Part 1: Intro
Part 2: Glossary
Part 3: Professional Standards
PS1 = Compliance with standards where a written valuation is provided
PS2 = Ethics, competency, objectivity and disclosures
Part 4: Valuation technical and perfomrance standards
VPS1 = Terms of engagement
VPS2 = Inspections, investigations and records
VPS3 = Valuation reports
VPS4 = Bases of value, assumptions and special assumptions
VPS5 = Val approaches and methods
Part 5: Valuation applications
VPGA 1 = Val for inclusion in financial statements
VPGA 2 = Valuation of interests for secured lending
VPGA 3 = Val of businesses and business interests
VPGA 4 = Val of individual trade related properties
VPGA5 = Val of plant and equipment
VPGA 6 = Val of intangible assets
VPGA 7 = Val of personal property, including arts and antiques
VPGA 8 = Val of real property interests
VPGA 9 = Identification of portfolios, collections and groups of properties
VPGA 10 = Matters that may give rise to material val uncertainty
Part 6: International Val standards

Question 3

What are the two Professional Standards?

Answer 3

PS1 = Compliance with standards where a written valuation is provided

PS2 = Ethics, competency, objectivity and disclosures

Question 4

What does VPS stand for?

Answer 4

Val technical and performance standards

Question 5

What are the 5 VPS?

Answer 5

1. VPS1 = Terms of engagement
2. VPS2 = Inspections, investigations and records
3. VPS3 = Valuation reports
4. VPS4 = Bases of value, assumptions and special assumptions
5. VPS5 = Val approaches and methods

Question 6

What are the 10 VPGAS?

Answer 6

VPGA 1 – Valuation for inclusion in financial statements
VPGA 2 – Valuation of interests for secured lending
VPGA 3 – Valuation of businesses and business interests
VPGA 4 – Valuation of individual trade related properties
VPGA 5 – Valuation of plant and equipment
VPGA 6 – Valuation of intangible assets
VPGA 7 – Valuation of personal property, including arts and antiques
VPGA 8 – Valuation of real property interests
VPGA 9 – Identification of portfolios, collections and groups of properties
VPGA 10 – Matters that may give rise to material valuation uncertainty.

Question 7

Purpose of the VPGAs

Answer 7

embody ‘best practice’ – that is procedures that in
the opinion of RICS meet a high standard of professional competence.

Question 8

What are the principal changes to The Red Book Global effective from January 2022?

Answer 8

In line with VPGA 2

Terms of reference must be clear and unambiguous over whether a valuation is Red Book compliant or not
Sustainability and ESG brought to the forefront:
- Valuers should have regards to relevance and significant of ESG and Sustainability factors which form an integral part of the valuation approach and reasoning during the inspection, reporting and valuation for loan securing purposes.

Question 9

What is the red book?

Answer 9

Mandatory rules and best practice for members who undertake valuations

Question 10

When is the red book used?

Answer 10

Mandatory for all valuations except

valuation for internal purposes
valuation for agency work
valuation required by law

Question 11

What does VPS 1 cover?

Answer 11

Terms of engagement (IVS 101 scope of work)

Question 12

What does VPS 2 cover?

Answer 12

Inspections, Investigations and Records

Valuers must take steps to verify all the necessary information being relied upon to ensure information is adequate

Question 13

What does VPS 3 cover?

Answer 13

Valuation reports

The minimum requirements that must be stated within the report.

Question 14

What does VPS4 cover?

Answer 14

Basis of value
The valuer must determine the basis of value that is appropriate for every valuation to be reported.

Question 15

What are the different basis of value?

Answer 15

Market Value
Market Rent
Fair Value
Equitable Value
Investment Value
Liquidation Value

Question 16

What does VPS5 cover?

Answer 16

Valuation approaches and methods.

Valuers are responsible for choosing and justifying their valuation approach and use of model
In some cases, more than one approach may be appropriate.

Question 17

Where in the red book do you find the definition of Market Value?

Answer 17

VPS4 / glossary

Question 18

What are some of the UK VPGAs?

Answer 18

Valuation for Charity Assets
Valuation for UK Residential Property
Valuation of Social Housing for loan security

Question 19

What is the aim of the red book?

Answer 19

to main confidence in clients, and public that an RICS valuer anywhere in the world can undertake a valuation to the highest standard.

Question 20

Assumption

Answer 20

A supposition taken to be true. It involves facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement,
do not need to be verified by the valuer as part of the valuation process.

Typically, an assumption is made where specific investigation by the valuer is not required in order to prove that something is true.

Question 21

cost approach

Answer 21

An approach that 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 construction.

Question 22

fair value

Answer 22

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.’ (This definition derives from International Financial
Reporting Standards IFRS 13.)

Question 23

income approach

Answer 23

An approach that provides an indication of value by converting future cash flows to a single current capital value.

Question 24

investment value, or worth

Answer 24

The value of an asset to the owner or a prospective owner for individual investment or operational objectives (see IVS 104 paragraph 60.1). (May also be known as worth.)

Question 25

market approach

Answer 25

An approach that provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available.

Question 26

market rent

Answer 26

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and 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 (see IVS 104 paragraph 40.1).

Question 27

market value
(MV)

Answer 27

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 (see IVS 104 paragraph 30.1)

Question 28

equitable value

Answer 28

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 (see IVS 104 paragraph 50.1).

Question 29

external valuer

Answer 29

A valuer who, together with any associates, has no material links with the client, an agent acting on behalf of the client or the subject of the assignment

Question 30

internal valuer

Answer 30

A valuer who is in the employ of either the enterprise that owns the assets, or the accounting firm responsible for preparing the enterprise’s financial records and/or reports.

An internal valuer is generally capable of meeting the requirements of independence and professional objectivity in accordance with PS 2 section 3, but may not always be able to satisfy additional criteria for independence specific to certain types of assignment, for example under PS 2 paragraph 3.4

Question 31

special purchaser

Answer 31

A particular buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market

Question 32

special assumption

Answer 32

An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.