The Exposure Draft of Guidance on Various Bases of Value Published by IVSC

The basis of value as defined by the body called International Valuation Standard is a statement of essential measurement assumption of making valuation. A title will be contained in the basis of value, for example ‘market value’ and a definition accompanying that hypothesis where the value is determined.

The draft guides and illustrates examples in assisting practitioners in applying bases of valuation has been published by the International Valuation Standards Council (IVSC). These bases include:

Market Value

This is the exchange amount that an asset will fetch or liability expected to settle at the date of valuation between a buyer and seller in a transaction at arms-length in a proper market and where both parties had acted not only acted voluntary, but with prudence and knowledge.

Investment value

For an individual investment or operational objective, this is the owner’s or prospective owner’s asset’s value

Fair value

This is the value anticipated for an asset’s or liability’s transfer price between willing and identified knowledgeable parties which is a reflection of the interest of those parties

Synergistic Value

This is the value of the additional value that is created from combining some assets or interests where the value combined is greater than the summation of different values.

Special Value

This is an amount which reflects an asset’s specific attributes which are only valuable to an exceptional buyer.

The illustrative examples and guidance have been published in order to help practitioners to understand better those concepts within the IVS framework by way of making illustrations of their applications in a variety of scenarios. It is important to note that the illustrative examples and guidance are not party to these standards. Additional directions on other issues are expected to be published soon and respondents have been asked to rank other areas in their perceived priority.

The Exposure Draft Bases of valuation can be found on the website of IVSC.