REA DEFINITION OF TERMS Flashcards
(25 cards)
To assist in the readability of the standards and to avoid repetition, the
words “______” refer generally to items that might be subject to a valuation engagement. Unless otherwise specified in the standard, these terms can be considered to mean “asset, group of assets, liability, group of liabilities, or group of assets and liabilities”.
Asset or Assets
The word “_____” refers to the person, persons, or entity for whom the valuation is performed. This may include external clients (ie, when a valuer is engaged by a third-party client) as well as internal clients (ie, valuations performed for an employer).
Client
The word “jurisdiction” refers to the legal and regulatory environment in
which a valuation engagement is performed. This generally includes laws and regulations set by governments (eg, country, state and municipal) and, depending on the purpose, rules set by certain regulators (eg, banking authorities and securities regulators).
Jurisdiction
The word “may” describes actions and procedures that valuers have a responsibility to consider. Matters described in this fashion require the valuer’s attention and understanding. How and whether the valuer implements these matters in the valuation engagement will depend on the exercise of professional judgement in the circumstances consistent with the objectives of the standards.
May
The word ______ indicates an unconditional responsibility. The valuer must fulfill responsibilities of this type in all cases in which the circumstances exist to which the requirement applies
Must
The word “________” refers to the relevant participants pursuant to the basis (or bases) of value used in a valuation engagement (see IVS 104 Bases of Value). Different bases of value require valuers to consider different perspectives, such as those of “market participants” (eg, Market Value, IFRS Fair Value) or a particular owner or prospective buyer (eg,
Investment Value).
Participant
The word “_______” refers to the reason(s) a valuation is performed.
Common purposes include (but are not limited to) financial reporting, tax reporting, litigation support, transaction support, and to support secured lending decisions.
Purpose
indicates responsibilities that are presumptively
mandatory. The valuer must comply with requirements of this type unless the valuer demonstrates that alternative actions which were followed under the circumstances were sufficient to achieve the objectives of the standards.
In the rare circumstances in which the valuer believes the objectives of the standard can be met by alternative means, the valuer must document why the indicated action was not deemed to be necessary and/or appropriate.
If a standard provides that the valuer “should” consider an action or procedure, consideration of the action or procedure is presumptively
mandatory, while the action or procedure is not.
Should
Assessing _________ require professional judgement.
However, that judgement should be made in the following context:
• Aspects of a valuation (including inputs, assumptions, special
assumptions, and methods and approaches applied) are considered
to be ___________ if their application and/or impact on the valuation could reasonably be expected to influence the economic or other decisions of users of the valuation; and judgments about materiality are made in light of the overall valuation engagement and are affected by the size or nature of the subject asset.
• refers to the valuation engagement, which may be different from materiality considerations for other purposes, such as financial statements and their audits.
Significant and/or Material
These terms refer to the asset(s) valued in a particular valuation
engagement.
Subject or Subject Asset
refers to the reason(s) a valuation is performed.
Common purposes include (but are not limited to) financial reporting, tax
reporting, litigation support, transaction support, and to support secured
lending decisions
Valuation Purpose or Purpose of Valuation
is a professional valuer engaged to review the work of
another valuer. As part of a valuation review, that professional may perform
certain valuation procedures and/or provide an opinion of value.
Valuation Reviewer
is an individual, group of individuals or a firm who possesses the
necessary qualifications, ability and experience to execute a valuation in an
objective, unbiased and competent manner. In some jurisdictions, licensing
is required before one can act as a _____.
Valuer
refers to the amount of reliance placed on a particular
indication of value in reaching a conclusion of value (eg, when a single
method is used, it is afforded 100% weight).
Weight
refers to the process of analysing and reconciling
differing indications of values, typically from different methods and/or
approaches. This process does not include the averaging of valuations,
which is not acceptable.
Weighting
“an individual, group of individuals, or a firm
possessing the necessary qualifications, ability and experience to undertake
a valuation in an objective, unbiased and competent manner. In some
jurisdictions, licensing is required before one can act as a valuer. Because
a valuation reviewer must also be a valuer, to assist with the legibility of
these standards, the term valuer includes valuation reviewers except where
it is expressly stated otherwise, or is clear from the context that valuation
reviewers are excluded
Valuer
The process of valuation requires the valuer to make impartial judgements
as to the reliability of inputs and assumptions. For a valuation to be credible,
it is important that those judgements are made in a way that promotes
transparency and minimises the influence of any subjective factors on the
process. Judgement used in a valuation must be applied objectively to avoid
biased analyses, opinions and conclusions.
Objectivity
It is a fundamental expectation that, when applying these standards,
appropriate controls and procedures are in place to ensure the necessary
degree of objectivity in the valuation process so that the results are free from
bias. The IVSC Code of Ethical Principles for Professional Valuers provides
an example of an appropriate framework for professional conduct.
Objectivity
Valuations must be prepared by an individual or firm having the appropriate
technical skills, experience and knowledge of the subject of the valuation,
the market(s) in which it trades and the purpose of the valuation.
Competence
If a valuer does not possess all of the necessary technical skills, experience
and knowledge to perform all aspects of a valuation, it is acceptable for the
valuer to seek assistance from specialists in certain aspects of the overall
assignment, providing this is disclosed in the scope of work (see IVS 101
Scope of Work) and the report (see IVS 103 Reporting).
Competence
The valuer must have the technical skills, experience and knowledge to
understand, interpret and utilise the work of any specialists
Competence
circumstance where specific legislative, regulatory or
other authoritative requirements must be followed that differ from some
of the requirements within IVS. Departures are mandatory in that a
valuer must comply with legislative, regulatory and other authoritative
requirements appropriate to the purpose and jurisdiction of the valuation to
be in compliance with IVS. A valuer may still state that the valuation was
performed in accordance with IVS when there are departures in
these circumstances
Departures
requirement to depart from IVS pursuant to legislative, regulatory
or other authoritative requirements takes precedence over all other IVS
requirements.
Departures
required by IVS 101 Scope of Work, para 20.3 (n) and IVS 103 Reporting,
para 10.2 the nature of any departures must be identified (for example,
identifying that the valuation was performed in accordance with IVS and
local tax regulations). If there are any departures that significantly affect the
nature of the procedures performed, inputs and assumptions used, and/or
valuation conclusion(s), a valuer must also disclose the specific legislative,
regulatory or other authoritative requirements and the significant ways in
which they differ from the requirements of IVS (for example, identifying
that the relevant jurisdiction requires the use of only a market approach
in a circumstance where IVS would indicate that the income approach
should be used
Departures
