RICS Red Book Jan 2020 Flashcards
When did the most recent RICS Valuation - Global Standards become effective?
The RICS Valuation - Global Standards was effective from:
Issued November 2019, effective from 31st January 2020
What three forms do the Global Standards for Valuation take?
The three forms the Global Standards for Valuation take are:
Professional Standards - centred on ethics and conduct, underpinned by knowledge and competence
Technical standards – centred on common definitions and conventions, underpinned by consistent application through recognised approaches
Performance or delivery standards – centred on rigour in analysis and objectivity of judgment, backed by appropriate documentation and clarity when reporting.
What is the RICS Valuation - Global Standard commonly referred to?
The RICS Valuation - Global Standard is commonly called:
RICS Red Book Global
What are the RICS Valuation - Global Standards used for?
RICS Valuation - Global Standards are used for:
With its focus on practical implementation, RICS Valuation – Global Standards, commonly referred to as the RICS Red Book Global, applies the latest international standards and supplements them with additional requirements and best practice guidance that, when combined, provide the highest levels of assurance regarding professionalism and quality.
RICS Valuation - Global Standards are used by competent surveyors to produce valuations.
What is the aim of RICS Valuation - Global Standards?
The aim of RICS Valuation - Global Standards is:
The aim is simply stated – it is to engender confidence, and to provide assurance to clients and recognised users alike, that a valuation provided by an RICS-qualified valuer anywhere in the world will be undertaken to the highest professional standards overall.
What are the mandatory professional standards?
The mandatory professional standards are:
PS 1 – Compliance with standards where a written valuation is provided
PS 2 – Ethics, competency, objectivity and disclosures.
Global professional and ethical standards as they expressly apply to valuers are denoted by the use of a PS reference number and are mandatory (unless otherwise stated) for all members providing written valuations. They define the parameters for compliance with the Red Book Global, including adoption of the International Valuation Standards; set out the associated RICS regulatory requirements; and clarify the detailed application of the RICS Rules of Conduct when members are undertaking valuation work.
What are the mandatory valuation, technical and performance standards?
The mandatory valuation, technical and performance standards are:
VPS 1 – Terms of engagement (scope of work)
VPS 2 – Inspections, investigations and records
VPS 3 – Valuation reports
VPS 4 – Bases of value, assumptions and special assumptions
VPS 5 – Valuation approaches and methods.
Global valuation technical and performance standards are denoted by the use of a VPS reference number and contain specific, mandatory (unless otherwise stated) requirements and related implementation guidance, directed to the provision of a valuation that is IVS-
compliant.
While VPS 1, 4 and 5 focus more on technical standards and VPS 2 and 3 focus more on performance and delivery standards, it would not be helpful to seek to categorise them further in any way. Instead their current order corresponds with that of the International
Valuation Standards, which the VPSs adopt and apply.
What are the advisory RICS global valuations practice guidance - applications?
The advisory RICS global valuation practice guidance - applications are:
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.
RICS valuation practice guidance – applications are denoted by the use of a VPGA reference number and provide further implementation guidance in the specific instances listed. Thus, among the topics covered, they include valuations for specific purposes (of which financial reporting and secured lending are among the most widely encountered), and valuations of certain specific asset types, where particular issues and/or practical considerations expressly need to be taken into account. These VPGAs embody ‘best practice’ – that is procedures that in the opinion of RICS meet a high standard of professional competence.
While not themselves mandatory, the VPGAs do include links and cross references to the material in the International Valuation Standards and to material in these global standards that is mandatory. This is intended to assist members in identifying material relevant to the
particular valuation assignment they are undertaking.
What is an assumption?
An assumption is - 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.
What is the basis of value?
Basis of value is - a statement of the fundamental measurement assumptions of a valuation.
What is a cost approach?
A cost approach is - 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.
What is a departure?
A departure is - special circumstances where the mandatory application of the global standards may be inappropriate or impractical.
What is depreciated replacement cost (DRC)?
Depreciated replacement cost (DRC) is - the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence
and optimisation.
What is equitable value?
Equitable 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.
Although in many cases the price that is fair between two parties will equate to that obtainable in the market, there will be cases where the assessment of Equitable Value will involve taking into account matters that have to be disregarded in the assessment of Market Value, such as certain elements of Synergistic Value arising because of the combination of the interests.
What is an external valuer?
An external valuer is - 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.
What is fair value?
Fair value is - 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.)
What are financial statements?
Financial Statements are - written statements of the financial position of a person or a corporate entity, and formal financial records of prescribed content and form. These are published to provide information to a wide variety of unspecified third party users. Financial statements carry a measure of public accountability that is developed within a regulatory framework of accounting standards and the law
What is income approach?
Income approach is - an approach that provides an indication of value by converting future cash flows to a single current capital value.
What are the International Financial Reporting
Standards (IFRS)?
International Financial Reporting Standards (IFRS) are -standards set by the International Accounting Standards Board (IASB) with the objective of achieving uniformity in accounting principles. The standards are developed within a conceptual framework so that elements of financial statements are identified and treated in a manner that is universally applicable.
What is an investment property?
An investment property is - property that is land or a building, or part of a building, or both, held by the owner to earn rentals or for capital appreciation, or both, rather than for:
A: use in the production or supply of goods or services,
or for administrative purposes, or
B: sale in the ordinary course of business.
What is PS 1?
PS 1 - Compliance with standards where a written valuation is provided
What is PS 2?
PS 2 - Ethics, competency, objectivity and disclosures.
