Transcript MALAYSIA VALUATION STANDARD - the estate gazette

MALAYSIA VALUATION
STANDARD
RED BOOK ( MVS 3,4,5)
By: SAIFUL NIZAM ALI
Department of Urban Studies(D.O.U.S.T),IITechnology
MVS 3 – Valuation for Financial
Reporting
INTRODUCTION:
 Adoption to the “mark to market value” or Fair Value
for Accountants. Companies require valuation of their
assets at more regular intervals need to show these
assests (held for use in their business or as
investments or surplus)
Why we need to prepare VFR
 Requirement by MASB for financial reporting
standards which has the force of law and is
mandatory for public listed company under SC, CB
and CCM. i.e. Financial statement for year ended 2012
for Sentoria Group Berhad.
 Our report no to reflect the overall performance of
the company but state the value of an assets owned
by company (tangible and intangible)
Statements of Standard
 Valuers must have basic understanding of accounting
concepts and principles. In particular valuers must have a
working knowledge of how property, plant and equipment
are recognized in the accounts acquisition price and
depreciated replacement cost basis (DRC)
 Knowledge and understanding of MASB terms:
- FRS 116 – Property, Plant and Equipment.
- FRS 117 – leases
-FRS 140 – Investment property
-FRS 102 – Inventories
- FRS 136 – Impairment of assets
- FRS 3 – Business combinations
- FRS 5 - Assets for sale and discontinuation
 Knowledge in IVS also need to be updated.
Basis of valuation
 Valuation Reporting “ Fair Value”
Definition to FV
 “ as the amount for which an asset could be
exchange or a liability settled between
knowledgeable, willing parties in arm’s length
transaction” –Malaysian Accounting Standard Board.
 Similar to MV definition as guided by MVS.
Inspecting
 Ascertaining and confirm with the companies the
appropriate asset class – Interest to be valued.
 Reporting valuation reports methodology used in
arriving at the MV bearing in mind the requirements
with MASB such as “market-based evidence”.
 If non “market-based evidence of fair value”
Depreciated replacement cost (DRC) need to be
adopted in arriving the FV. i.e special charac. Assets
silo, ships and oil rigs.
Explanation
 Land and building normally used “market based
evidence” adopt 5 methods of valuation.
 DRC to calculate value of assets at the end of
economic life. Thus, depreciation approach need to
be considered.
 D = P ( 1 - i )n, where n is years.
Revision
1) Every year depreciation of certain plant is taken as
8% of its value at the beginning of the year. If the
acquisition initial value is RM 300,000, calculate the
value of after 7 years.
2) Toyota Hiace is RM 70,000 when new. It is estimated
that it depreciates in value by 10% each year. In how
many years will it be reduced to salvage value for
company’s assets disposal purposes. Advice your
client.