Transcript International Valuation Standards Council (IVSC)

International Valuation
Standards Council (IVSC)
Its Role, Today’s Standards Setting
Environment and Current Projects
Steve Sherman – Standards Board Chair
Tom Boyle, MAI – Standards Board member
July 25, 2013
Disclaimer
The views expressed at this conference and in
any accompanying document are the personal
views of the presenters and do not necessarily
represent those of the IVSC Boards. Standards
and Guidance are only issued by the Boards after
following a process of public consultation and
open deliberation.
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Today’s Agenda
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IVSC Overview
International Valuation Standards
Overview
Current Environment for Valuation
Standards
Current Projects
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International Valuation Standards Council
Overview
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IVSC Website
The IVSC – Objectives
• Develop high quality international standards
and support their adoption and use;
• Facilitate collaboration and cooperation among
its member bodies;
• Collaborate and cooperate with other
international organisations;
• Serve as the international voice for the
valuation profession.
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The IVSC’s Authority Comes From:
• Consulting with valuation users and regulators
to identify their concerns;
• Working with professional valuers to identify
solutions; and
• Developing and promoting those solutions.
Enforcement of and compliance with IVS is by those
adopting the standards, e.g. regulators, professional
bodies, clients.
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The IVSC – Structure
Board of Trustees:
Strategy, Governance
and
Fund-raising
Standards Board:
Professional Board:
Standards and Technical
Guidance
Development and Promotion
of the Valuation Profession
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IVSC – Board of Trustees
Chairman – Sir David Tweedie
 2001, elected first Chairman of International Accounting
Standards Board (served 10 yrs)
 In 2001, only a handful of countries used international
standards (IFRS) but by 2011 over 120 countries required or
permitted their use
 Former member of the Financial Stability Board
 Fellow of the Judge Business School at Cambridge University
 Knighted in 1994
 President of The Institute of Chartered Accountants of
Scotland for 2012-13. Chairs the Royal Household Audit
Committee for the Sovereign Grant
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Board of Trustees (continued)
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Patrick Gounelle (France), Vice Chair
Nicolas Brooke (Hong Kong)
Roel Campos (U.S.A)
Brad Dalglish (Canada)
Lee Hackett (U.S.A.)
Madame Ping Lui (China)
Malcolm Knight (Canada/U.S.A.)
April Mackenzie (New Zealand)
Jens Roder (Denmark)
John Smith (U.S.A.)
Frank Vettese (Canada)
Akihiro Watanabe (Japan)
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Members – Valuation Professional
Organizations
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Australia, Belarus,
Bosnia and
Herzegovina, Botswana
Brazil, Bulgaria
Canada, China,
Colombia, Croatia
Egypt, Finland
Georgia, Greece
Hong Kong,
India, Indonesia
Ireland, Italy
Japan
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Kazakhstan, Kenya, Korea
Latvia, Lithuania
Malawi, Malaysia, Mexico
Namibia, The Netherlands
New Zealand, Norway,
Nigeria
Philippines, Poland
Romania, Russia
Serbia, Slovenia, South
Africa
Spain, Sweden
Thailand
Ukraine
United Kingdom
United States of America
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Valuation Professional Organizations
Advisory Forum
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American Society of Appraisers
Appraisal Institute
Appraisal Institute of Canada
Asociación Profesional de Sociadades de Valoración
(ATASA)
Australian Property Institute
Canadian Institute of Chartered Business Valuators
Hong Kong Institute of Surveyors
Royal Institute of Chartered Surveyors
The Appraisal Foundation
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International Valuation Standards
Overview
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Appraisal Institute: Preamble to Code of
Professional Ethics (effective July 1, 2006)
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Objectives of the International Valuation
Standards
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PROTECT THE PUBLIC INTEREST (i.e., investors,
taxpayers)
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Promote consistency of approaches
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Position valuers to perform high quality work
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Develop common terminology
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Establish a framework for delivering valuations
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Provide transparency
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History
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IVSC published first definitions and standards
in early 1990s
In 2000 first comprehensive book of standards
published – four subsequent editions to 2007
By 2007 had grown to book of over 450 pages
but the detail was presenting obstacles to
wider adoption
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IVS Improvements Project
Guiding principles for rewrite:
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Make general principles “asset neutral”
Identify principles that could be applied globally
Exclude terms and practices only found in certain
market or countries
Distinguish rules from discussion and guidance
Keep language simple
Avoid jargon and unnecessary definitions
Avoid repetition
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IVS Revision Process
 Market factors beginning in
2008 were catalysts for this
project
 52 comment letters received
and reviewed
 Three global roundtables held
in 2010 (NY, Hong Kong,
London)
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IVS
 Board Approved in March 2011
 Published July 2011
 Effective January 1, 2012
 May be purchased from IVSC
online, (£40)
 IVSonline:
www.ivsc.org/products
 Technical Information Papers
(TIPs) available separately
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IVSonline – subscription service
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IVS Structure
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IVS Definitions
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IVS Framework
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11 Standards (standards & guidance):
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3 General Standards
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6 Asset Standards
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2 Application Standards
Technical Information Papers (TIPS):
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DCF
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Cost Approach for Tangible Assets
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Valuation of Intangible Assets
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Accessible from the AI Website
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The IVSC’s Standard Setting Process
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Needs are identified through research
and public consultation
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Proposed standards are debated at open
board meetings
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Comments are solicited through a public
exposure process
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New and revised standards are
periodically published and posted on the
IVSC’s website
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IVSC Standards Board
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Steve Sherman, (U.S.A.) Chair. BV
Frank Bollman, (Germany) Vice Chair. BV
Thomas Boyle (U.S.A.), Real Property
Ana Castaneda (Spain), Financial Instruments
Jim Eales (United Kingdom), BV
Paul Hawkes (Switzerland) Financial Instruments
Simon Landy (Thailand), Real Property
Dr. Cindy Ma (U.S.A.), Financial Instruments
Chris Stanley (New Zealand), Real Property
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Current Environment for Valuation
Standards
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What Do Others Think?
• G20 – in 2009 recognised valuation as
being a contributory factor to the financial
crisis…
• …but asked accountants (IASB) to fix it!
• Scepticism around fair value measurements
under IFRS
• SEC comments 2005 and 2011
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Comments from the SEC
(from Dec 2011)
“The broadening application of fair value …and the
2008 financial crisis have cast the spotlight on
valuation professionals. At last count, valuation
professionals in the US can choose among five
business valuation credentials available from four
different organizations, each with its own set of criteria
for attainment…... Risks created by the differences in
valuation credentials that exist today range from the
seemingly innocuous concerns of market confusion
….to the more overt concerns of objectivity of the
valuator and analytical inconsistency.”
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Comments from the SEC (continued)
“One potential solution to consider is whether
there should be, similar to other professions, a
single set of qualifications with respect to
education level and work experience, a continuing
education curriculum, standards of practice and
ethics, and a code of conduct. One could also
contemplate whether a comprehensive inspection
program and a fair disciplinary mechanism should
be established to encourage proper behavior and
enforce the rules of the profession in the public
interest.” est.”
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Restatements of US Public Companies
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Over 50% of restatements in
certain years may have involved
FV measurements
Nearly one-third of Goodwill
written off in 2008/09 (over
$700B)
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Regulatory reviews: greater
focus on audit evidence
supporting FV measurements
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PCAOB 2009/10 Inspection Reports:
Fair Value Deficiencies
Breakdown of Deficiencies by Topic Area in
2009:
Financial Instruments
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Inspections of the Big 4 in
2009 resulted in 37 audits
containing a “deficiency”
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Of these, 26 (70%) involved
fair value measurements
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Goodwill and Intangible Asset Impairment
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Long-Lived Asset Impairment Analysis
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54/77 in 2010 = 70%
Inventory Valuation
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Other
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Foreign regulators
increasingly in contact with
the PCAOB
Total
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IVSC Speaking for Global Profession
 Good relationships with other private sector standard
setters in financial markets, eg:
IASB, FASB
IFAC
IPEV
 One of nine bodies invited to give joint
recommendations to G20 on how private sector can
contribute to better financial regulation.
 Interaction with financial regulators, eg:
FSB, IOSCO
SEC, PCAOB,
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Adoption of the IVSs
 Adopted as national standards in many countries (e.g.
Australia, New Zealand, Romania, South Africa,
Turkey)
 Some countries have adopted as national standards with
amendments to meet requirements of national legislation.
 Professional organisations adopting IVS:
 AI
 RICS
 ASA (non-US reports)
 On going IVS Adoption efforts.
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IVS – Current Projects
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Updating and Clarification of Standards
In June 2013, the Standards Board approved minor
amendments to the 2011 Standards:
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Clarifying applicability to valuation reviews
Clarifying valuers’ duty to investigate and when
information provided by others may be relied upon
More explicit encouragement of using multiple methods
to cross check
Amendments approved by Board in June 2013
New standards will be effective from 1 January 2014
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IVSC Technical Projects
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Equity Derivatives – Exposure Draft published July 2013
Credit and Debit Valuation adjustments – Exposure Draft
expected fall 2013.
Valuation Uncertainty – Comments received on Exposure
Draft; TIP in development.
Commercial Forestry – Further research due to diversity
revealed by responses to Exposure Draft.
Extractive Industries: Comments on 2012 Discussion
Paper being analysed.
Trade Related Property: Exposure Draft received few
comments. Issue being evaluated.
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IVSC Technical Projects - Continued
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Investment Property: Discussion Paper published
November 2012 – comments being analysed
Liabilities: Comments on 2012 Discussion Paper being
analysed
Specialised Public Service Assets: Review comment letters on
the proposed TIP.
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IVSC Professional Development Projects
 Audit Guidance for Valuers: Revising following
comments on 2012 Exposure Draft.
 Professional Valuer Competencies: Expanding the
basic Competency Framework published in 2012.
 Regulatory Convergence: Paper aimed at promoting
role that better valuation standards can play in
improving the global regulation of the financial sector. s.
 Illustrative Examples Exposure Draft due Q3 2013
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International Valuation Standards
Council
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Thank you for your attention!
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Questions?
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