Red Book Flashcards
PS1
Compliance where written valuation
Mandatory
5 exceptions
What are the five exceptions to red book global
- Expert witness
- Agency and brokerage apart from purchase report
- Statutory purposes
- Internal accounts
- Negotiation or litigation
PS2
Professional and efhical standards
Independence
Terms of engagement
VPS 1
Terms of engagement
VPS2
Basis of value, assumptions and special assumptions
Market value
The estimated amount for which an asset or liability should exchange
1. On the valuation date
2. Between a willing buyer and a willing seller
3. In an arms length transaction
4. After proper marketing
5. And where each party had acted knowledgeably, prudently and without compulsion
Fair value
The price that would be received to sell and asset or transfer a liability in an orderly transaction between two market participants and the measurement date
Market rent
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 arms length transaction where each party has acted knowledgeably, prudently and without
VPS 3
Valuation approaches and methods
Must justify what method - wrong method can lead to misleading valuation
VPS 4
Inspection, Investigations and reports
- Verify necessary information
- No physical inspection must introduce an unacceptable degree of risk
- Proper records
VPS 5
Valuation models
Must be fit for purpose
Tested to ensure accuracy
VPS 6
Valuation reports
Deal with all matters in the TOE
transparency on approach, method
Clearly and accurately set our
Identify sustainability
VPGA 1
Valuation For inclusion in financial accounts
Fair value adopted for all IFRs adopted accounts
VPGA 2
Secures lending
Disclose conflicts for the last two years
MSA - confirm in writing and document additional requirements
ENQUIRE WHETHER THERE HAS BEEN RECENT TRANSACTIONS OR A PRICE PROVISION
VPGA 4
Valuation of trade related properties
- state in report that valuation is assess having regard to the trading potential
FMOP
Fair maintainable operating profit - level of profit stated prior to depreciation and finance costs
Depreciation
Tangible asset deterioration over time
Amortisation
The decline to the value of intangible assets
E.g intellectual property or brand reputation
What is the trading potential
Stabilised profit a REO could achieve
VPGA 8
Valuation of real property assets
- inspections investigations with particular emphasis on ESG and sustainability issues
VPGA 10
Matters that may give rise to material valuation uncertainty
Report must not be misleading
Draw attention to issues relating to material uncertainty in the valuation relating to risk
Material uncertainty
Disruption to trade throughout Covid, rising costs has increased uncertainties regarding the financial viability and performance of operators, and their trading performance going forward. Poses risk to value to trade related assets which are based upon what a reo could expect to achieve.
Operators have gone bust need to draw lender attention to risk
Caused market disruption
VPGA 11
Relationship with auditors
NEW
Guidance for sharing info with auditors
