PVS Flashcards
Adoption of the IVSC Valuation Standards under Philippine Setting
Philippine Valuation Standards (1st Edition) 2009
established in 2001, spearheading the government’s land reform program in partnership with the Australian Government (technical assistance) and the World Bank (financial support)
Land Administration and Management Project (LAMP)
DOF thru BLGF and NTRC (National Tax Research Center) is tasked with implementing these reforms
-Implement a valuation system
-Establish an independent national authority
-Develop valuation standards
-Raise the level of and professionalize the property valuation industry
Real Estate Service Act of 2009
RA 9646
Real Estate Service Act (RA 9646) was signed by? date?
Gloria Macapagal Arroyo; June 29, 2009
Real Estate Service Act (RA 9646) effectivity date?
July 30, 2009
Real Estate Service Act of 2009 transfer the regulatory function of ___ to ___ thru the direcr supervision and regulatory control of ___
DTI; PRC; PRBRES
technical arm responsible for pursuing the valuation reform agenda created by DOF in 2007
Property Valuation Staff (PVS)
The PVS 1st Edition is based on what edition of IVS
8th Edition
those who deal with the special discipline of preparing and reporting valuations
valuer
The IVSC has undertaken 8 revisions of the International Valuation Standards, which were published in
1985, 1994/97, 2000, 2001, 2003, 2005, 2007
The IVSC has grown by the year 2007 to include associations with member or observer status representing how many countries?
52 countries
IVSC is a Non-Government Organization (NGO) member of
United Nations
IVSC at the time PVS (1st Edition) was released, the following papers were available
2 White papers:
-Valuation in Emerging Markets
-The Valuation of Real Estate Serving as Collateral for Securised Instruments
1 Technical Paper:
-Mass Appraisal for Property Taxation
IVSC international headquarters
12 Great George Street, London, UK
a term referring to valuations performed primarily for use in financial reporting
asset valuation
a person who posseses the necessary qualifications, ability, and experience to estimate property value for a diversity of purposes including transactions involving transfer of property ownership, property considered as collateral to secure loans and mortgages, property subject to litigation or pending settlement of taxes, and property treated as fixed assets in financial reporting
Professional Property Valuer
The IVS represent accepted, or best, practice in the Valuation profession, also known as
Generally Accepted Valuation Principles (GAVP)
IVSC, the organization of the standards follows:
- Introduction
- Concepts Fundamental to Generally Accepted Valuation Principles
- Code of Conduct
- Property Types
- Introduction to the Standards
- Standards
- Applications
- Guidance Notes
- Glossary
3 principal elements of the IVS
Standard, Application and Guidance Notes
wether vacant or improved, land is also referred to as
real estate
is created by real estate’s utility, or capacity to satisfy the needs and want of human societies
value
Contributing to value are real estate’s
uniqueness, durability, fixity of location, relatively limited supply, specific utility
is a legal concept encompassing all the interest, rights and benefits related to ownership
Property
the ownership of real estate
Real Property
rights associated with the ownership of real property
bundle of rights
is defined as the physical land and those human-made items, which attach to the land
Real Estate
includes all the rights, interests, and benefits related to the ownership of real estate
real property
includes interests in tangible and intangible items which are not real estate
personal property
are resources controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
assets
assets not intended for use on a continuing basis in the activities of an entity. (Ex: stocks, obligations owed to the entity, short term investments, cash in bank/hand)
Current assets
fixed or long-term assets
Non-current assets
Non-current assets are tangible and intangible assets which fall into the following 2 broad categories
-Property, plant, machinery and equipment
-Other non current assets (not intended for use in a continuing basis but expected to be held long term, ex. long-term investments, long-term receivables, goodwill, expenditures carried forward, patents, trademarks)
Machinery and Equipment is the collective term adopted by ___ while Plant and Equipment is adopted by ___
Valuers, Accountants
adjustments made to the cost of reproducing or replacing the asset to reflect physical deterioration and functional (technical) and external (economic) obsolescence
depreciation
In financial reporting, this refers to the charge made against income to reflect systematic allocation of the depreciable amount of an asset over its useful life to the entity
depreciation
a term used for the amount asked, offered, or paid for a good or service
Price
the price paid for goods or services or the amount required to create or produce the good or service
cost
the environment in which goods and services trade between buyers and sellers through a price mechanism
market
is an economic concept referring to the price most likely to be concluded by the buyers ans sellers of a good or service that is available for purchase
value
is not a fact, but an estimate of the likely price to be paid for goods and services at a given time
value
defines the nature of the hypothetical transaction, e.g., whether or not there is exposure to a market, and the assumed motivation and behavior of the parties
Basis of Value
most common type of value associated with property valuations
market value
the cost to create a virtual replica of a property using identical or, if identical materials are not available, similar materials
Reproduction cost
cost for a modern equivalent of comparable utility, employing the design, technology and materials
replacement cost
define market value according to PVS 1st Edition
the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion
a market in which commodities are available for immediate sale
spot market
define Highest and best use
The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued
in markets characterized by extreme volatility or severe disequilibrium between supply and demand, the highest and best use of the property is
holding for future use
where land use and zoning are in a state of change, the immediate highest and best use of the property may be
interim use
an accounting concept, is defined in the International Financial Reporting Standards and other accounting standards as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction
Fair Value
is property that is rarely, if ever, sold in the market except by way of sale of the business or entity of which it is part, due to uniqueness arising from its specialized nature and design, its configuration, size, location, or otherwise
Specialized property
refers to generally accepted analytical methodologies that are in common use
valuation approach or method
this principle holds that a prudent person would not pay more for a good or service than the cost of acquiring an equally satisfactory substitute good or service
principle of substitution
3 valuation approaches
- Sales Comparison Approach
- Income Capitalization Approach
- Cost Approach
this comparative approach considers the sales of similar or substitute properties and related market data, and establishes a value estimate by processes involving comparison
Sales Comparison Approach
this comparative approach considers income and expense data relating to the property being valued and estimates value through a capitalization process
Income Capitalization Approach
principle which holds that the income stream which produces the highest return commensurate with a given level of risk leads to the most probable value figure
principle of substitution
this comparative approach considers the possibility that, as an alternative to the purchase of a given property, one could acquire a modern equivalent asset that would provide equal utility
Cost Approach
in applying an income capitalization approach to determine the price that investor is willing to pay for a particular investment based on the investor’s anticipated rate of return, a valuer arrives at an estimate of
Investment Value or Worth
are suppositions taken to be
true
Assumptions
constraints
imposed on valuations
Limiting Conditions
a person who possesses the
necessary qualifications, ability, and
experience to execute a valuation
Valuer
Valuer who is in the employ of either the entity that owns the assets or the accounting firm responsible for preparing the entity‘s financial record and/or reports
Internal Valuer
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
External Valuer
4 categories of property
real property, personal property, businesses, financial interests
is an interest in real estate
real property
encompasses all the rights, interests, and benefits related to the ownership of real estate
real property
real property is to realty, personal property is to
personalty
all the rights associated with the ownership of real property
bundle of rights
Absolute ownership subject only to
limitations imposed by the country
fee simple estate, or freehold
Under a lease, the landlord, or lessor, maintains the ownership interest, known in some countries as the
leased fee estate
The interest which the tenant, or lessee,
acquires under the lease, known in some countries as the
leasehold estate
are created when the tenant or lessee in a prior lease conveys to a third party, a sublessee, the interest that the tenant, or lessee, enjoys, i.e., the right to use and occupy the property
Subleaseholds
non- possessory (incorporeal) interests in landed property conveying use, but not ownership, of a portion of that property
Easements
created by legal divisions of the ownership interest
Partial or fractional interests
The interest of a beneficiary under a trust is known as the
equitable or equity interest
A beneficiary is said to hold ___ while ___ is held by the trustee
equitable title, legal title
are created by mortgage pledges where the property is used as collateral to secure finance or a charge is taken over the property
Security or financial interests
refers to ownership of an interest in items other than real estate
Personal Property
are attached to the property by the
tenant and used in conducting the trade or business
trade fixtures / tenant’s fixtures / Non-realty fixtures
are fixed improvements or additions to the land or buildings, installed and paid for by the tenants to meet the tenant’s needs
Leasehold improvements, or
tenant’s improvements
are the sum of liquid assets less short-term liabilities
net current assets
are interest held in intangible entities
Intangible assets
any commercial, industrial,
service or investment entity pursuing an economic activity
business
an entity normally viewed
as continuing in operation in the foreseeable future with neither the intention nor necessity of liquidation or of curtailing materially the scale of its operations
going concern
Properties such as hotels; fuel stations;
restaurants; and movie theatres, or cinemas
trade related properties
include current assets, and long-term assets such as realty, fixtures, equipment, and tangible personal property
Tangible assets
include management skill, marketing know-how, credit rating, an assembled work force, an operational plant, goodwill, and ownership of various legal rights and instrument (e.g.,
patents, copyrights, franchises and
contracts)
Intangible assets
Valuations of going concerns are generally based on
Value in Use
an ownership arrangement in which all partners share in investment gains and losses and each is fully responsible for all liabilities
general partnership
an ownership arrangement consisting of general and limited partners; the general partners manage the business and assume full liability for partnership debt while the limited partners are passive and liable only to the extent of their own capital contributions
limited partnership
a combination of two or more entities that join to undertake a specific project
joint venture
an agreement to keep open an offer to buy, sell, or lease real property for a specified period and at a stated price
option
is any liability that is: a contractual obligation to deliver cash or another financial asset to another entity to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity
financial liability
any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity
financial instrument
any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities
equity instrument
a financial instrument that, from the issuer‘s perspective, contains both a liability and an equity element
compound (financial) instrument
value is created and sustained by the inter-relationship of four factors
utility, scarcity, desire, and purchasing power
The utility for which a good or service
is produced and the scarcity, or limited
availability, of the good or service are
generally considered
supply-relatedfactors
Consumer preferences and purchasing power, which reflect desire for the good or service and define the affordability of the item, are generally considered
demand-related factors
an environment in which goods, services, and commodities are
traded between buyers and sellers through a price mechanism
market
states that the price of a good or service, or commodity varies inversely with the supply of the item and directly with the demand for the item
principle of supply and demand
In property markets, this represents
the quantity of property interests that are available for sale or lease at various prices in a given market within a given period of time, assuming labor and production costs remain constant
supply
In property markets, constitutes the number of possible buyers or renters seeking specific types of property interests at various prices in a given market within a given period of time, assuming other factors such as population, income, future prices, and consumer preferences remain constant
demand
the amount that has been asked, offered, or paid for the item
price
the amount of money required to create or produce a commodity, good, or service
cost
an estimate of the most likely price that will be paid for a good or service available for purchase at a given time
value
describes the nature of this hypothetical transaction, for example, whether or not it takes place in a public market and what accounts for the motivation and behavior of the parties
Basis of Value
most probable use of the property asset, which is a significant determinant of value
highest and best use
is one between parties who do not have a particular or special relationship (for
example, parent and subsidiary companies or landlord and tenant) that may make the price level uncharacteristic of the market or
inflated because of an element of Special Value
arm’s length transaction
establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it
without compulsion
Periods of rapid changes in market
condition are typified by rapidly changing prices, a condition commonly referred to as
disequilibrium
A statement of the fundamental measurement principles of a valuation on a specified date
Basis of Value
The amount for which an asset could be exchanged between knowledgeable, willing parties in an arm‘s-length transaction
Fair Value
The value of property to a particular investor, or a class of investors, for identified investment or operational objectives
Investment Value, or Worth
A purchaser to whom a particular asset has Special Value because of advantages arising from its ownership that would not be available to general purchasers in the market
Special Purchaser
An amount above the Market Value that reflects particular attributes of an asset that are only of value to a Special Purchaser
Special Value
An additional element of value created by the combination of two or more interests where the value of the combined interest is worth more than the sum of the original interests
Synergistic Value
This value describes a situation where an entire business is transferred as an operational entity
Going Concern Value
This value describes a situation where a group of assets employed together in a business are offered for sale separately, usually following a closure of business
Liquidation Value
This value describes the value of an asset that has reached the end of its economic life for the purpose it was made. The asset may still have value for
an alternative use or for recycling
Salvage Value
the value that the basic recoverable materials (usually metals) of a physical property would have as junk if it were completely broken up or too badly deteriorated to serve its normal purpose
Scrap Value
the value of an asset at the end of its
physical life
Scrap Value
term used in circumstances where a seller is under compulsion to sell and/or a proper marketing period is not available
forced sale
If a Valuer is involved in a valuation
assignment in a capacity other than as a Valuer, for example _____ the Valuer should disclose the specific role taken in each assignment.
as an independent or impartial agent, as a consultant or advisor to a business entity, or as a mediator
If a valuation by an Internal Valuer
is made, there shall be a specific
____ of the existence and nature of any such relationship
disclosure in the Valuation Report
the final step in the valuation
process
valuation report
An affirmative statement attesting to the fact that the Valuer has followed the ethical and professional requirements of the IVSC Code of Conduct in performing the assignment
Compliance Statement
The results of a valuation, verbally communicated to a client or presented before a court either as expert testimony or by means of deposition
oral report
The first step in the Valuation Process, which establishes the context and scope/extent of the assignment and resolves any ambiguity involving the valuation issue or problem
Specifications for the Valuation
Assignment
A document that records the instructions for the assignment, the basis and purpose of the valuation, and the results of the analysis that led to the opinion of value
valuation report
The results of a valuation communicated to a client in writing, which includes electronic communication
written report
The current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimization
Depreciated Replacement Cost
A property that is rarely if ever sold in the market, except by way of sale of the business or entity of which it is part, due to uniqueness arising from its specialized nature and design, its
configuration, size, location, or otherwise
Specialized Property
The amount at which an asset is recognized after deducting any accumulated depreciation
(amortization) and accumulated
impairment losses thereon
Carrying Amount
The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets
Cash-Generating Unit
The systematic allocation of the depreciable amount of an asset over its useful life
Depreciation
the period over which an asset is
expected to be economically usable by one or more users
Economic Life
The amount obtainable from the sale of an asset or cash-generating unit in an arm‘s length transaction between
knowledgeable, willing parties, less the
costs of disposal
Fair Value Less Costs to Sell
The amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount
Impairment Loss
The estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale
Net Realizable Value
The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its
useful life
Residual Value
The fair value of an asset at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment
losses
Revalued Amount
The present value of the future cash flows expected to be derived from an asset or cash-generating unit
Value in Use
These include Agricultural and
Forestry assets
Biological Assets
A collection or aggregation of properties held by a single
ownership and jointly managed
Portfolios
a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not be eventually transferred
finance lease
a lease other than a finance lease
operating lease
A pledge of an interest in property as security or collateral for repayment of a loan with provision for redemption on repayment
Mortgage
Certain classes of real property, which are designed for a specific type of business and that are normally bought and sold to the market, having regard to their trading potential
Trade Related Property
A loss in value due to a decrease in the usefulness of property caused by decay, changes in technology,
people‘s behavioral patterns and tastes, or environmental changes
Obsolescence
The process by which a least cost replacement option is determined for the remaining service potential of an asset
Optimization
Assets having some cultural, environmental or historical
significance
Heritage assets
The higher of a non-cash-generating asset‘s fair value less costs to sell and its value in use
Recoverable service amount
Naturally occurring flora and fauna
include special conservation assets, which may or may not be protected
Non-Agricultural Biological Assets
The Valuer considers both the highest
and best use of the land as though ___ and the highest and best use of the property as ___
vacant, improved
principle which holds that when
several similar or commensurate
commodities, goods or services are
available, the one with the lowest price
attracts the greatest demand and widest distribution
principle of substitution
The totality of private ownership
rights associated with a particular property is referred to as a
freehold interest
is an indirect comparison technique that develops a ratio between land value and improvement value or some other relationship between
property components
Allocation
indirect comparison technique (sometimes called abstraction). It provides a value estimate of improvements by applying a cost less depreciation analysis and extracting the result from the total price of otherwise comparable properties
Extraction
properties that have characteristics
similar to those of the property being
valued (the subject property)
Comparable Data
In the sales comparison approach, comparable sales data are adjusted to reflect the differences between each comparable property and the subject property. Elements of comparison include
R-F-C-E-M-L-P-E-U-N
real property rights conveyed,
financing terms,
conditions of sale,
expenditures made immediately after purchase,
market conditions,
location,
physical characteristics,
economic characteristics,
use,
non-realty components of sale
Define Highest and Best Use
The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible,
and which results in the highest value of
the property being valued.
includes all of the research, data,
reasoning, analysis, and conclusions
necessary to arrive at a value estimate
valuation
data that are collected at the neighborhood, city, regional, and even national and international levels, depending on the property involved
General economic data
data more directly relevant to the property being valued and to comparable properties are
also gathered and examined
Property-specific data
first requisite step toward selecting sales and other comparable data is to determine the ___ of the subject property
highest and best use (HABU)
based on the notion that although two or more parcels of real estate may have physical similarities and closely resemble one another, there may be significant differences in how they can be used
The concept of HABU
When data are available, the ___ is the most direct and systematic approach to estimating value
sales comparison approach
an element of comparison wherein a precise identification of the real property rights conveyed in each comparable transaction, selected for analysis, is essential because the transaction price is always predicated on the property interest conveyed
Real property rights conveyed
an element of comparison where different financing arrangements can cause the price paid for one property to differ from that of another identical property, the types and conditions of financing arrangements in the transaction shall be fully understood, analyzed, and accounted for
Financing terms
an element of comparison when there are special motivations of the parties to the transaction in many situations can affect the prices paid and even render some transactions as non-market
Conditions of sale
an element of comparison when there are expenditures that would have to be made upon purchase of the property and that a knowledgeable buyer may negotiate into the purchase price
Expenditures made immediately
after the purchase
an element of comparison that include rapidly appreciating or depreciating property values, changes in tax laws, building restrictions or moratoriums, fluctuations in supply and demand, or any combination of forces working in concert to alter market conditions from one date to another
market conditions
an element of comparison when the locations of the comparable sale properties and the subject property are compared to ascertain whether location and the immediate environs are influencing the prices paid
location
an element of comparison where attributes such as the size, construction
quality, and physical condition of the
subject property and the comparable
properties are described and analyzed by the Valuer
physical characteristics
an element of comparison where qualities such as income, operating
expenses, lease provisions, management, and tenant mix are used to analyze income-producing properties
economic characteristics
an element of comparison where zoning and other restrictions
or limitations affect the use of a property. If there is a difference in the current use or highest and best use of a comparable property and that of the subject property, its impact on value shall be carefully considered
use
an element of comparison such as personal property, business interests, or other items that do not constitute real property may be included in either the transaction price or the ownership interest in the property being valued
non-realty components of sale
are a form of real property, arising from
the contractual relationship (the terms of which are conveyed by a lease) between a lessor, one who owns the property leased to another, and a lessee, or tenant, one who typically receives a non-permanent right to use the leased property in return for rental payments or other valuable economic
consideration
Lease interests
A fee simple estate, representing the perpetual ownership in land.
Freehold Interest
the ownership interest of a lessor owning real estate that is subject to (a) lease(s) to others
Leased Fee Interest
Usually a long-term lease of land with the lessee permitted to improve or build on the land and to enjoy
those benefits for the term of the lease
Ground Lease
A lease to a single entity that is intended to be the holder of subsequent leases to sublessees
that will be the tenants in possession of the leased premises
Headlease, or Master Lease
has the same meaning as Sandwich Lessor Interest. The holder of a headlease or master lease
Headleasehold Interest
A contract arrangement in which rights of use and possession are conveyed from a property‘s title owner
(called the landlord, or lessor) in return for a promise by another (called a tenant, or lessee) to pay rents
lease
The excess value, if any, produced by a
merging of two or more interests in a
property, over-and-above the sum of the values of those individual interests
Marriage Value, Synergistic Value,
Plottage Value or Merged Interests Value
The estimated amount for which a property, or space within a property, should lease on the date of valuation between a willing lessor and a
willing lessee on appropriate lease terms in an arm‘s-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion
Market Rent
The rent specified by a given lease
arrangement
contract rent
Any form of lease rental arrangement in which the lessor receives a form of rental that is based on the earnings of the lessee
Turnover Rent or Participation
Rent
A simultaneous sale of real estate and lease of the same property to the seller. The buyer becomes the lessor, or landlord, and the seller becomes the lessee, or tenant
Sale and Leaseback
Hierarchy of Property Rights
- Freehold or Fee Simple Absolute
- Lease Interest, Leasehold
- Sublease Interest, Subleasehold
- Subordinate Sublease Interest
The ownership interest that is created by the terms of a lease rather than the underlying rights of real estate ownership
Leasehold or Lease Interest
Leasehold alterations that usually arise where a property is leased in a basic state or constructed to a “shell” specification that is not suitable for occupation without the lessee undertaking further building or
fitting-out work
Obligatory alterations
Leasehold alterations that typically arise where a property is
leased in a completed state ready
for immediate occupation, but
where the lessee elects to undertake
work to improve or adapt the
accommodation to suit the lessee’s
own particular requirements
Voluntary alterations
‘Machinery and Equipment’ is the collective term adopted by ___, while ‘Plant and Equipment’
is adopted by ___
Valuers, Accountants
Tangible assets, other than realty
Plant and Equipment
Assets that are inextricably
combined with others and that may
include specialized buildings, machinery and equipment
plant
Individual machines or a collection of machines. An apparatus used for a specific process in connection with the operation of the entity.
machinery
Other assets that are used to assist the operation of the enterprise or
entity
Equipment
With respect to assets, the capitalized
cost of an asset less accumulated
depreciation, depletion, or amortization as it appears on the account books of the business
book value
At a given date, the conversion into
the equivalent capital value of net income or a series of net receipts, actual or estimated, over a period
Capitalization
Any multiple or divisor used to convert income into capital value
Capitalization Factor
Any divisor (usually expressed as a percentage) that is used to convert income into capital value
Capitalization Rate
Net income after taxes, plus non-cash items such as depreciation and amortization
Gross Cash Flow
During an operating period, that amount of cash that remains
after all cash needs of the business have been satisfied
Net Cash Flow
Net income after taxes, plus depreciation and other
non-cash charges, less increases in
working capital, less capital expenditures, less decreases in invested capital debt principal, plus increases in invested capital
debt principal
Equity Net Cash Flow
A rate of return used to convert a monetary sum, payable or receivable in the future, into present value
Discount Rate
The period over which property may be profitably used
Economic Life
The date as of which the Valuer‘s opinion of value applies
Effective Date
An operating business
Going Concern
Future economic benefits arising
from assets that are not capable of being individually identified and separately recognized
Goodwill
The value of profit over and above market expectations, which would be extinguished upon sale of the trade related property, together with
those financial factors related specifically to the current operator of the business, such as taxation, depreciation policy, borrowing costs and the capital invested in the business
Personal Goodwill
That intangible asset that arises as a result of property specific name and reputation, customer patronage, location, products, and similar factors, which generate economic benefits. It is inherent to the trade related property, and will transfer to a new owner on sale
Transferable Goodwill
Assets that manifest themselves by their economic properties. They do not have physical substance; they grant rights and privileges to their owner and usually generate income for their owner
Intangible Assets
a special classification of intangible assets because it is usually protected by law from unauthorized use by others. Examples are brand names, or tradenames; copyrights; patents; trademarks; trade secrets, or
know-how; among others
Intellectual Property
The life of the intangible assets allowed by law
Legal Life
An amount of income (loss) and/or change in value realized or anticipated on an investment, expressed as a percentage of that
investment
Rate of Return.
The current cost of a similar new item having the nearest equivalent utility as the item being appraised.
Replacement Cost New
The current cost of an identical new item
Reproduction Cost New
This value type focuses on the value that specific property contributes to the entity of which it is a part without regard to the property‘s highest and best use or the monetary amount that might be realized upon its sale
Value in Use
the value a specific property has for a specific use to a specific user and is, therefore, non-market related
Value in use
The price that is the final accepted bid at a public auction; may or may not include any fees or commissions
Auction Price
The accepted and announced bid, exclusive of any fees or commissions and therefore, not necessarily
the purchase price
Hammer Price
The amount considered, on the basis of an evaluation of available facts, to be the ‘true’ or ‘real’ worth of an item.
Intrinsic Value
A legal term used to designate items of personal property in distinction to realty, which may either refer to real property or real estate
Personalty
A business that receives returns on its assets
Holding Company
Ownership position greater than 50% of the voting interest in a business
Majority Interest
Total assets less total liabilities
Net Assets
Revenue less expenses, including taxes
Net Income
The amount by which current assets exceed current liabilities
Working Capital
specific materials that, by their presence or proximity, may have adverse effect on property value because of their potential to
cause harm to life-forms
Hazardous or toxic substances
It is a process of adjusting the
replacement cost to reflect that an asset may be technically obsolete or over-engineered, or the asset may have a greater capacity than that required
Optimization
can be caused by advances in technology that result in new assets being capable of a more efficient delivery of goods and services
Functional obsolescence
A financial modeling technique
based on explicit assumptions regarding the prospective cash flow to a property or business.
Discounted Cash Flow Analysis
(DCF)
The discount rate that equates the present value of the net cash flows of a project with the present value of the capital investment
Internal Rate of Return (IRR)
payment of interest and principal
debt finance or debt service
the sum of inflows less the sum of outflows
net cash flows per period
Agricultural properties used for growing commodities that are typically planted and harvested within a twelve-month cycle
Cropping Farms
Agricultural property used for the growing of non-orchard trees that are periodically harvested over extended growing periods (10 to 20 or more years)
Forestry/Timberland
Crops grown from plantings that have a life extending beyond one year or one-crop cycle
Perennial Plantings
land devoted principally to the planting of trees, raising of crops, livestock and poultry, dairying, salt making, inland fishing and similar aqua-cultural activities, and other agricultural activities, and is not classified as mineral, timber, residential, commercial or industrial land
Agricultural Land
as defined in DENR Administrative Order No. 99-53: “is a production sharing contract entered into by and between the DENR and a qualified applicant wherein the DENR grants to the latter the exclusive right to develop, manage, protect and utilize a specified area of forestland and forest resources therein for a period of 25 years and may be renewed for another 25-year period”
Integrated Forest Management Agreement (IFMA)
a review of a Valuer‘s work undertaken by another Valuer exercising impartial judgment
valuation review
A valuation review performed by a client or user of valuation service as an exercise in due diligence when the valuation is to be used for purposes of decision-making such as underwriting, purchasing, or selling the property
Administrative (Compliance) Review
A valuation review that is limited to the data presented in the report, which may or may not be independently confirmed
Desk Review
A valuation review that includes inspection of the exterior and
sometimes the interior of the subject
property and possibly inspection of the
comparable properties to confirm the data provided in the report
Field Review
A valuation review performed by a Valuer to form an opinion as to whether the analyses, opinions, and
conclusions in the report under review are appropriate, reasonable, and supportable
Technical Review
a valuation review undertaken to ensure that a valuation meets or exceeds the compliance
requirements or guidelines of the specific market and, at a minimum, conforms to Generally Accepted Valuation Principles
(GAVP)
Administrative (Compliance) Review
are individual properties, such as hotels, fuel stations, and restaurants that usually change hands in the marketplace while remaining operational
Trade Related Properties
Certain classes of real property, which are designed for a specific type of business and that are normally bought and sold in the market, having regard to their trading potential
Trade Related Properties
The Local Government Code governs the administration, appraisal, assessment, levy and collection of real property tax. (Section 197).
The following fundamental principles are provided in Section 198:
(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for
assessment purposes on the basis of its
actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local government unit;
(d) The appraisal, assessment, levy and
collection of real property tax shall not be let to any private person; and
(e) The appraisal and assessment of real
property shall be equitable.
A revenue-raising procedure, based on the assessed value of property related to a scale of charges defined by statute within a specified time-frame
Ad Valorem Property Taxation
The process of analyzing sets of property and market data to
determine the specific parameters
operating upon a model
Calibration
The practice of appraising multiple properties as of a given date by a systematic and uniform application of appraisal methods and techniques that allow for statistical review and analysis of results
Mass Appraisal
comprise the Minerals Industry and Petroleum Industry, but do not include activities focused on the extraction of water from the earth
Extractive Industries
Those industries involved in the finding,
extracting and associated processing of
natural resources located on, in or near
the earth‘s crust
Extractive Industries
Any naturally occurring material useful to, and/or having a value placed on it by humankind, and found in or on the earth‘s crust
Mineral
refers to all naturally occurring inorganic substance in solid, gas, liquid, or any intermediate state excluding energy materials such as coal,
petroleum, natural gas, radioactive
materials, and geothermal energy
Minerals
are lands in which minerals, metallic or non-metallic, exist in sufficient quantity or grade to justify the necessary expenditures to extract and utilize such materials
Mineral Lands
as defined in RA 7942, Philippine Mining Act of 1995, Section 5: paragraph (bb): ―refer to areas
established and proclaimed as such by the President upon the recommendation of the Director through the Secretary, including
all submerged lands within the contiguous zone and Exclusive Economic Zone
Mineral Reservations
Any naturally occurring hydrocarbon, whether in a gaseous, liquid or solid state
Petroleum
Real property publicly recognized or officially designated by a government-chartered body as having cultural or historic importance because of its association with an historic event or
period, with an architectural style, or with the nation‘s heritage
Historic Property
historic site or object hallowed and honored for their history or association
National Shrine
objects, structures or sites dedicated to
memorialize or give reverence to a
special historic personage or event
National Monuments
sites or structures that are associated with an event, achievement, characteristic, or modification that makes a turning point or stage in Philippine history
National Landmarks
natural areas or places with historical significance, and places recognized, marked or declared such as
Historic Sites
A series of payments made or received at intervals either for life or for a fixed number of periods
Annuity
The statement of a valuation in a proscribed format to meet statutory or regulatory requirements
Certification of
Value
Written acknowledgement or evidence of a debt, especially stock issued as security by a company for borrowed money
Debenture
A loss in value due to factors outside the subject asset
External or Economic Obsolescence
