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RICS APC 2025 > Valuation 2025 Updates > Flashcards

Valuation 2025 Updates Flashcards

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1
Q

What is a valuation?

A

An opinion of the value of an asset or liability on a stated basis at a specified date.

If supplied in written form, all valuation advice given by members is subject to at least some of the requirements of Red Book Global Standards – there are no exemptions.

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2
Q

What is Professional Standard 1 (PS1)?

A

Compliance with standards where a written valuation is provided.

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3
Q

What does Professional Standard 2 (PS2) cover?

A

Ethics, competency, objectivity and disclosures.

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4
Q

What are the valuation technical and performance standards?

A

Mandatory standards that include:
* VPS1: Terms of engagement (scope of work)
* VPS2: Bases of value, assumptions and special assumptions
* VPS3: Valuation approaches and methods
* VPS4: Inspections, investigations and records
* VPS5: Valuation models
* VPS6: Valuation reports

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5
Q

What is VPS1?

A

Terms of engagement (scope of work).

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6
Q

What does VPS2 address?

A

Bases of value, assumptions and special assumptions.

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7
Q

What is the focus of VPS3?

A

Valuation approaches and methods.

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8
Q

What is contained in VPS4?

A

Inspections, investigations and records.

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9
Q

What is VPS5?

A

Valuation models.

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10
Q

What does VPS6 cover?

A

Valuation reports.

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11
Q

What are RICS global valuation practice guidance applications (VPGAs)?

A

Guidance applications that include:
* VPGA 1: Valuations for financial reporting
* VPGA 2: Valuations for secured lending
* VPGA 3: Valuation of businesses and business interests
* VPGA 4: Valuation of trade related properties
* VPGA 5: Valuation of plant and equipment (including infrastructure)
* VPGA 6: Valuation of intangible assets
* VPGA 7: Valuation of arts and antiques
* VPGA 8: Valuation of real property interests
* VPGA 9: Valuing portfolios and groups of assets
* VPGA 10: Material valuation uncertainty (MVU)
* VPGA 11: Relationship with auditors

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12
Q

What is VPGA 1?

A

Valuations for financial reporting.

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13
Q

What does VPGA 2 focus on?

A

Valuations for secured lending.

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14
Q

What is addressed in VPGA 3?

A

Valuation of businesses and business interests.

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15
Q

What is the subject of VPGA 4?

A

Valuation of trade related properties.

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16
Q

What does VPGA 5 cover?

A

Valuation of plant and equipment (including infrastructure).

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17
Q

What is the focus of VPGA 6?

A

Valuation of intangible assets.

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18
Q

What does VPGA 7 address?

A

Valuation of arts and antiques.

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19
Q

What is VPGA 8?

A

Valuation of real property interests.

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20
Q

What does VPGA 9 involve?

A

Valuing portfolios and groups of assets.

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21
Q

What is the focus of VPGA 10?

A

Material valuation uncertainty (MVU).

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22
Q

What does VPGA 11 discuss?

A

Relationship with auditors.

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23
Q

What are the General Standards in valuation?

A

General Standards apply to all valuations and include:
* IVS 100: Valuation Framework
* IVS 101: Scope of Work
* IVS 102: Bases of Value
* IVS 103: Valuation Approaches
* IVS 104: Data and Inputs
* IVS 105: Valuation Models
* IVS 106: Documentation and Reporting

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24
Q

What is IVS 100?

A

Valuation Framework.

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25
What does IVS 101 cover?
Scope of Work.
26
What is IVS 102 about?
Bases of Value.
27
What does IVS 103 focus on?
Valuation Approaches.
28
What is addressed in IVS 104?
Data and Inputs.
29
What does IVS 105 cover?
Valuation Models.
30
What is IVS 106?
Documentation and Reporting.
31
Are PS1, PS2 and the VPSs mandatory for RICS members?
Yes, they are mandatory for any member of RICS or RICS-regulated firm.
32
What does PS1 stand for?
Professional Standard 1
33
What is the main requirement for Automated Valuation Models (AVMs) according to PS1?
Professional judgement must be applied in all cases
34
List examples of Automated Valuation Models (AVMs)
* Automated valuation model (AVM) * Valuation modelling tool or valuation calculation software * Valuation process software tool or template automation tool * Model and/or process assisted or produced by artificial intelligence (AI)
35
What are the conditions under which the use of AI is allowed according to PS1?
* Professional judgement * Terms of engagement * Investigation records * Reporting * Proportionately considering confidentiality, intellectual property, data verification, etc.
36
What are some examples where application of VPS 1-6 may be unsuitable?
* Agency or marketing advice * 'What if' valuations for negotiations or litigation * Expert witness * Performing statutory functions * Valuations for internal purposes only
37
What is a common compliance failing under PS1?
* Failure to comply with the Red Book * Valuation activity without VRS membership where mandatory
38
What does PS2 stand for?
Professional Standard 2
39
What are the key components of PS2?
* Professional and ethical standards * Member qualification * Independence and objectivity * Disclosures for public interest * Valuation review * Responsibility for the valuation
40
What is VPS 1 focused on?
Terms of engagement (Scope of work)
41
What must be considered during the inspection according to VPS 1?
Significant environmental, social and governance (ESG) factors
42
List common compliance failings under VPS 1.
* Failure to issue terms of engagement * Generic terms rather than case specific * Amendments not recorded * Omission of responsible valuer's identity
43
What is the focus of VPS 2?
Bases of value, assumptions and special assumptions
44
Define market value as per VPS 2.
The price at which an asset would trade in a competitive auction setting
45
What must valuations reflect according to VPS 2, section 8?
The price that would be agreed, not the net receipt or gross cost
46
What are common compliance failings under VPS 2?
* Bases of value not defined * Unexplained or irrelevant assumptions * Special assumptions not clearly defined
47
What is the responsibility of valuers under VPS 3?
To adopt and justify the valuation approaches and methods used
48
What valuation method is encouraged under VPS 3?
Discounted cash flow (DCF) for property investment valuations
49
List common compliance failings under VPS 3.
* Failure to state approaches and methods * Incorrect valuation approach used * Wrong method leading to misleading valuation
50
What does VPS 4 focus on?
Inspections, investigations and records
51
What must valuers do according to VPS 4?
Carry out necessary inspections and investigations for adequate valuation
52
What new requirement is introduced in VPS 4?
Keep a copy of the valuation report and all supporting documentation
53
What are common compliance failings under VPS 4?
* Illegible inspection notes * Brief notes of inspection * Unverified source data
54
What is defined as a Valuation model according to VPS 5?
A quantitative implementation of a method that converts inputs into outputs for value development
55
List the approaches mentioned in VPS 5.
* Market * Income * Cost
56
What methods are mentioned in VPS 5?
* Comparable * Investment * Profits * Residual * Contractors (Depreciated replacement costs)
57
What must valuers ensure regarding the model used for valuation?
The model must be suitable for the valuation purpose and use appropriate professional judgement. ## Footnote This includes ensuring accuracy and that users understand how the model works.
58
What are the key requirements for complex and proprietary valuation models?
The models must: * Be suitable for the intended use * Be tested for accuracy * Be 'fit for purpose' * Allow for professional judgement and scepticism * Be analysed for accuracy ## Footnote Users must also understand how the model works.
59
What are the general principles that valuation reports must adhere to?
Reports must: * Address all matters agreed in terms of engagement * Provide transparency on valuation approaches, methods, and models * Clearly set out conclusions * Be understandable to someone with no prior knowledge ## Footnote This ensures clarity and comprehensibility.
60
What matters must be addressed in the terms of engagement according to VPS 1 3.1?
Matters include: * Identification and status of the valuer * Identification of the client(s) * Identification of any other intended users * Identification of the asset(s) or liability(ies) * Valuation (financial) currency * Purpose of the valuation * Basis(es) of value adopted ## Footnote This sets the foundation for a clear engagement.
61
What is required regarding the identification and status of the responsible valuer in a report?
The report must include: * Signature of the responsible valuer * Statement confirming the valuer's objectivity and competence ## Footnote RICS does not allow a valuation to be prepared by a 'firm'.
62
What specific aspects must be included in a valuation report according to VPS 6 2.1?
The report must include: * Valuation date * Nature and extent of the valuer’s work * Nature and source of information * Assumptions and special assumptions * Format of report * Restrictions on use ## Footnote These aspects ensure comprehensive reporting.
63
What is the significance of significant environmental, social, and governance (ESG) factors in valuation?
Valuers must identify, report, and document the consideration of significant ESG factors and their impact on the valuation conclusion. ## Footnote This includes assessing sustainability characteristics and their relationship to property values.
64
What should valuers provide regarding sustainability and ESG-related property characteristics?
Valuers should: * Describe sustainability and ESG characteristics * Assess current compliance with sustainability criteria * Provide an opinion on the relationship between ESG factors and valuation * Comment on current benefits/risks * Evaluate potential impacts on value over time ## Footnote This ensures that ESG considerations are integrated into valuation practices.
65
What are common compliance failings in VPS 6 valuation reports?
Common failings include: * Identity of valuer omitted * Signed by unqualified valuer * Clear purpose of valuation not stated * Nature and extent of work undefined * Assumptions not clearly defined * Vague statements of valuation approach * Failure to amend errors from previous reports ## Footnote These failings can lead to significant issues in valuation credibility.
66
Fill in the blank: Reports must provide transparency on the valuation ______, methods, inputs, models, professional judgement and resultant value(s).
[approaches]

RICS APC 2025 (27 decks)

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