|
S. no |
Terminology |
Details |
Reference to InVS |
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1 |
Auction |
A sale usually in public, in which property is sold
to the highest bidder, provided the amount offered equals or exceeds any
reserve price set. |
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|
2 |
Bundle of rights |
The combination of rights associated with the
ownership of real property. The bundle-of –rights concept likens
property ownership to a bundle of sticks with each representing a
distinct and separate right of the property owner, e. g., the right to
use, to sell, to lease ,to give away, or to choose to exercise all or
none of these rights. |
General Valuation
concepts
and Principles,
Property Types |
|
3 |
Certification of value |
Required by some organizations in a prescribed
format for inclusion in the valuation report.
In a
certification of value, the valuer declares that the statements of fact
presented in the report are correct to the best of the valuer’s
knowledge; the analyses and conclusions are limited only by the reported
assumptions and conditions ;the valuer has no (or if so, a specified)
interest in the subject property; the valuer’s compensation is or is not
contingent upon any aspect of the report; the valuation was performed in
accordance with an ethical code and performance standards; the valuer
has completed a program of professional learning; the valuer has (or has
not) made a personal inspection of the property; and no one, except
those specified, has provided assistance in preparing the report.
The term certificate of value or statement of value
has no relationship to valuation reports but rather designates two other
documents prepared for statutory purposes. One is the form signed by the
purchaser of a property, attesting to the price paid for sale tax or
stamp duty, probate duty, or estate planning purposes. The other is the
document certifying the value of property sold to an authority that
exercises the power of compulsory acquisition. Since an understanding of
the analytical processes underlying a valuation is not required by
government administrative offices, the certificate of value or statement
of value only provides the stated Market Value of the property endorsed
by the statutory office holder, the date of valuation, and the barest
information about the property and the valuation.
See also Compliance Statement, Valuation Report.
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4 |
Comparable Data |
Data generally used in the valuation analysis to
develop value estimates; comparable data relate to properties that have
characteristics similar to the property being valued. Such data include
sale prices, rents, and expenses. |
GN 1, |
|
5 |
Comparable
Sales Method (Market or Direct Market comparison
Method) |
A valuation procedure using sales prices or rentals
of assets similar to the subject asset as a basis for estimating its
Market Value for sale or rent. The underlying assumption is that an
investor will pay no more for a property than he or she would have to
pay for a similar property of comparable utility. Also called sales
comparison approach. |
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6 |
Cost |
(i) The price paid for goods or services becomes
its cost to the buyer
ii) The amount required to create or produce the
good or service.
Cost is a production-related concept, distinct from
exchange. Once the good is completed or the service is rendered, its
cost becomes an historic fact.
The total cost of a property includes all direct
and indirect costs of its production.
See also Direct Costs, Indirect Costs, Price,
Value. |
General valuation concepts and principles,
Introduction to InVS 1,2 and 3, |
|
7 |
Cost Approach (Method) |
A comparative approach to the value of property or another asset, that
considers as a substitute for the purchase of a given property, the
possibility of constructing another property that is a replica of, or
equivalent to, the original or one that could furnish equal utility with
no undue cost resulting from delay. The valuer’s estimate is based on
the reproduction or replacement cost of the subject property or asset,
less total (accrued) depreciation, plus the value of the land to which
an estimate of entrepreneurial incentive or developer’s profit/loss is
commonly added. See also Depreciated Replacement cost, Depreciation
.Replacement Cost ,Reproduction Cost. |
General valuation concepts and principles
Property Types, GN
1, GN 5, |
|
8 |
Depreciable
Amount |
i) The cost of an asset, or other amount
substituted for cost in the financial statements, less its residual
value.
ii) That element of an asset that depreciates over
its useful life. The depreciable amount represents the wasting element
of the asset, the balance being the residual amount.
Typically, buildings or improvement are treated as
the depreciable amount while land is the residual amount. However,
leasehold land would also be depreciable. |
IAS 16,
IAS 36.
IAS 38.
IPSAS 17
|
|
9 |
Depreciation |
i) Loss in value from the cost of new and caused by
physical deterioration, functional (technical) obsolescence. and/or
economic (external) obsolescence. Also called accrued depreciation or
accumulated depreciation.
ii) The systematic allocation of the depreciable
amount of an asset over its useful life. In accounting, depreciation
refers to one or more deductions made for accounting (taxation) purposes
to allow for the actual or assumed reduction in the capital value
(cost) of an asset over an assumed or prescribed period. See also
Accruals for Depreciation |
General Valuation Concepts
And principles.
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|
10 |
Economic Life |
i) The number of years over which assets are
expected to render services of economic value, i.e., the time remaining
for the asset to earn profits.
ii) The period over which an asset is expected to
be economically usable by one or more users or the number of production
or similar units expected to be obtained from the asset by one or more
users |
IAS 17 |
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11 |
Effective date |
The date as of which the valuer’s opinion applies.
Also referred to as valuation date and/or as of date
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GN 1, |
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12 |
Emerging market
|
A market growing in size and sophistication and
found in a national economy, which is in transition to becoming more
developed and market-based. An emerging market may be a financial market
with a short operating history and/or low level of capitalization.
Characteristics common to emerging markets may
include significant structural changes in the national economy ;rapid
development of political, Legal, and institutional frameworks; and
transitioning from a planned or command economy to market-based economy.
As a result emerging markets are becoming increasingly globalised.
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13 |
Encumbrance |
An interest or right in real property that may
increase or decrease the value of the property but does not prevent its
conveyance by the owner. Examples include easements and restrictive
Covenants. |
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|
14 |
Fair value |
i) The amount for which an asset could be
exchanged, or a liability settled, between knowledgeable, willing
parties in an arm’s-length transaction.
In accounting, fair value anticipates a sale which
may occur in differing circumstances and in conditions other than those
prevailing in the (open) market for the normal, orderly disposition of
assets. These include the possibility of a sale under short-term
distress situations or other circumstances not contemplated in the
market value definition.
ii) The term fair valuers also used in legal
actions, to derive a settlement in disputes between parties, the
circumstances of which may not meet the definition of market value.
Hence fair value is not synonymous with market value.
iii) Fair value may represent the service potential
of an asset, i.e. the future economic benefits embodied in the asset in
terms of its potential to contribute, directly, to the flow of cash and
cash equivalents to the entity. |
General
Valuation concepts and principles,
IAS 6;
IAS17,
IPSAS16,
InVA1,
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|
15 |
Forced sale (Liquidation value) |
i) Market value, with a proviso that the vendor has
imposed a time limit for completion of the sale which cannot be regarded
as a reasonable time period, taking into account the nature of the
asset, its location, and the state of the market.
ii) The amount which may reasonably be received
from the sale of a property within a time frame too short to meet the
marketing time frame of the market value definition, in some States
forced sale value in particular may also involve an unwilling seller and
a buyer or buyers who buy with knowledge of the disadvantage of the
seller. |
In VS2
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16 |
Freehold |
Absolute ownership subject to limitation imposed by
the state; also an estate held for perpetuity. In certain States, it is
known as a free simple estate. |
Property Types. |
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17 |
Functional Obsolescence |
A loss in value within a structure due to changes
in tastes, preferences, technical innovations, or market standards.
Functional obsolescence includes excess capital
costs and excess Operating costs. It may be curable or incurable.
also called technical obsolescence. |
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18 |
GAVP |
Generally Accepted Valuation principles; best
practice in the valuation profession. |
Introduction/ InVS Objectives and Scope
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|
19 |
Going Concern |
The financial statements are normally prepared on
the assumption that an enterprise is a going concern and will continue
in operation for the foreseeable further. Hence, it is assumed that the
enterprise has neither the intention nor the need to liquidate or
curtail materially the scale of its operations; if such an intention or
need exists, the financial statements may have to be prepared on a
different basis and, if so the basis used is disclosed.
An operating business.
Going concern also serves as a premise under which
Valuers and accountants consider a business as an established enterprise
that will continue in operation indefinitely. Adoption of a going
concern premise allows the business to be valued above liquidation value
and is essential to the development of the market value of the business. |
GN4,
GN6, |
|
20 |
Going Concern value |
The value of a business as a whole, subject to
adequate potential profitability or service potential of the enterprise,
with all its assets and liabilities, goodwill and potentialities. If the
premises used are owned by the business, they from part of the going
Concern value on the basis of their value to the
business. The concept involves valuation of a continuing enterprise from
which allocations or apportionments of overall going concern value may
be made to constituent parts as they contribute to the whole, but none
of the components of themselves constitute Market value. See also
Deprival Value
The value of a business, or an interest therein, as
an operating business.
Intangible elements of value in a business
enterprise resulting from factors such as having a trained workforce, an
operation plant, and the necessary licensees, systems, and procedures in
place. |
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21 |
Good will |
i) This is an intangible but marketable asset based
on the probability that customers will continue to resort to the same
premises where the business is carried on under a particular name, or
where goods are sold or services provided under a trade name, with the
result that there is likely to be continuing prospect of earning an
acceptable profit.
Goodwill may be property-specific or inherent
within the property. Or goodwill may be largely or wholly personal. In
such case the good will element will be extinguished upon sale of the
property.
That intangible asset that arises as a result of
name, reputation, customer patronage, location, products, and similar
factors, which generate economic benefits.
ii) Any excess of the cost of acquisition over the
acquirer’s interest in the fair value of the identifiable assets and
liabilities acquired as at the date of the exchange transaction. |
Property type GN 4,GN 6 |
|
22 |
Ground lease |
Usually a long-term lease of land with the lessee
permitted to improve or build on the land and to enjoy those benefits
for the term of the lease. |
GN 2, |
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23 |
Highest and best Use
|
The most probable use of a property, which is
physically possible, appropriately justified, legally permissible,
financially feasible, and which results in the highest value of the
property being valued. See also Market Value. |
General valuation concepts and principles
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|
24 |
Impairment |
When recoverable amount declines below carrying
amount. see Carrying Amount, Impairment Loss Recoverable Amount. |
IAS 36, |
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25 |
Improvement |
Buildings, structures, or modifications to the land
of a permanent nature, involving expenditures of labour and capital,
and intended to enhance the value or utility of the property.
Improvements have differing patterns of use and economic lives. See also
Land, Value of improvements. |
IVA1,GN8 |
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26 |
Intangible Assets |
Assets that manifest themselves by their economic
properties; they do not have physical substance; they grant rights and
privileges to their owner; and usually generate income for their owner.
Intangible Assets can be categorised as arising from: Rights;
Relationships; Grouped Intangibles; or Intellectual Property.
In general, the accounting profession limits the
recognition of individual intangible assets to those that are: commonly
recognizable; have a statutory or contractual remaining life; and /or
must be individually transferable and separable from the business.
An identifiable non-monetary asset without physical
substance held for use in the production or supply of goods or services,
for rental to others, or others, or for administrative services. |
GN 4 |
|
27 |
Intangible property |
The rights and privileges granted to intangible
assets |
GN 4 |
|
28 |
Limiting Conditions |
Constraints which are imposed on valuations by
clients, the valuer, or local statutory law. |
Code of Conduct |
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Market |
It is the environment in which goods and services
trade between buyers and sellers through the price mechanism.
The concept of a market implies an ability of goods
and / or services to trade among buyers and sellers without undue
restriction on their activities. A market can be local, national, or
international.
See also Demand, Principle of Supply and Demand
Supply. |
General Valuation Concepts and Principles, Introduction to
InVS.2 & 3.2 |
|
29 |
Market Value |
The estimated amount for which a property should
exchange on the date of valuation between a willing buyer and a willing
seller in an arm’s –length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently, and without
compulsion.
The concept of market value reflects the collective
perceptions and actions of a market and is the basis for valuing most
resources in market-based economies. The professionally derived Market
Value is an objective valuation of identified ownership rights to
specific property as of a given date.
See also Highest and Best Use, Non-Market Bases of
Value |
InVS-1 |
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30 |
Market Value for the Existing Use (MVEU) (or
Existing Use Value) |
The estimated amount for which the land should
exchange vacant possession, based on continuation or its existing use,
between a willing buyer and willing seller in an arm’s length
transaction after proper marketing wherein the parties had acted
knowledgeably, prudently, and without compulsion. In the context of DRC
methodology, the existing use value of the land may be applied in
developing one part of the DRC model. The reported DRC estimate should
nonetheless reflect the Market Value of the land component based on its
highest and best use.
It should be noted that the International
Accounting
Standards no longer recognize MVEU and that the
MVEU basis of valuation has been taken under advisement by the IVSC.
|
G.N.8, |
|
31 |
Net Realisable value |
i) The estimated selling price of an asset in the
ordinary course of business, less selling costs and costs of completion.
ii) It is the estimated proceeds of sale of an
asset, less the selling costs; it is an exit value.
iii) The estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Net realizable value is used only within the
context of IAS 2, Inventories,for properties held for disposal. In those
circumstances, that figure would equate to Market value definition are
met. In particular, this includes sufficient time for the market value
transaction to occur. Market value is ordinarily a gross figure or. more
appropriately a” face value” prior to deduction of disposition costs.
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32 |
Non-Market Bases of value |
Valuation of property may be based on consideration
of the economic utility or functions of a property other than its
ability to be bought and sold by market participants, or the effects of
unusual or a typical market conditions. see also Assessed, ratable, or
Taxable value: Going Concern Value: Insurable value: Investment value or
worth; Liquidation or Forced sale value; Marriage value; Savage value;
Special value in Use. |
Introduction to INVS.
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|
33 |
Obsolescence |
A loss in value due to decrease in the usefulness
of property caused by decay, changes in technology, people’s behavioral
patterns and tastes, or environmental changes. Obsolescence is some
times classified according to items of outmoded design and
functionality, over design /over engineering (for eg. An asset designed
to produce at a capacity which current demand no longer warrants),items
with structural design unable to meet current code requirement and
factors arising outside the asset (external of economic obsolescence)
such as changes in user demand. |
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34 |
Personal Property |
A legal concept referring to all rights, interests,
and benefits related to ownership of items other than real estate. In
certain States, items of personal property are legally designated as
personality in distinction to realty, which may either refer to real
estate. Items of personal property can be tangible, such as a chattel,
or intangible, such as a debt or patent. Items of tangible personal
property typically are not permanently affixed to real estate and are
generally characterized by their moveability.
Personal property may be valued according to its
Market value, salvage value, or liquidation value.
The techniques used In the three valuation
approaches may be applied to the valuation of personal property. See
also Collectibles; Fixtures and Fittings; Furniture, Fixtures, and
Equipment ( FF&E);Goods and Chattels personal; leasehold Improvements
or Tenant’s.
Improvements; Plant and Equipment; Trade Fixtures
or Tenant’s Fixtures. |
General valuation Concepts and Principles, property types,
GN5
|
|
35 |
Plant and Equipment |
Assets intended for use on a continuing basis in
the activities of an enterprise/entity including specialized,
non-permanent buildings; machinery (individual machines or collections
of machines, trade fixtures, and leasehold improve-rentals);and other
categories of assets, suitably identified.
Tangible assets that:
(a) are held by an enterprise/entity for use in the
production or supply of goods or services, for rental to others, or for
administrative purposes; and (b) are expected to be used over a period of time.
See also personal property. |
Property Types GN 3,GN 5.
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|
36 |
Price |
An amount asked, offered or paid for a good or
service. The concept of price relates to the exchange of a commodity,
good, or service. Once the exchange has been transacted, the price,
whether, publicly disclosed or kept confidential, becomes an historic
fact. The price paid represents the intersection of supply and demand
See also cost, value. |
General valuation concepts and principles, Introduction to In VS1 |
|
37 |
Professional
Asset valuer |
A person with the necessary qualifications,
ability, and experience to execute valuations of land, buildings, and/or
plant and machinery, generally for incorporation in to company
financial
statements. See also professional property valuer. competence
of valuer,
|
Introduction /In VS objectives and Scope, Competence of valuer. |
|
38 |
Professional
property valuer |
A person who possesses necessary qualifications,
ability, and experience to estimate property value-generally the value
of real property for a diversity of purposes including transactions
involving transfers of property ownership, property considered as
collateral to secure loans and mortgages, property subject to litigation
or pending settlement on taxes, and property treated as fixed assets in
financial reporting A professional property valuer may also possess the
specific expertise to perform valuations of other categories of property
,i.e., personal property, businesses, and financial interests. See also
External valuer, Independent valuer, Internal valuer, Professional Asset
Valuer, Valuer. |
Introduction/InVS
Objectives and Scope;
GN-5,0
Competence of Valuer. |
|
39 |
Property |
A legal concept, encompassing all the interests,
right, and benefits related to ownership.
Property consists of the private rights of
ownership which entitle the owner to a specific interest or interests in
what is owned. To distinguish between real estate, a physical entity,
and its ownership, a legal concept, the ownership of real estate is
called real property. Ownership of an interest in an item other than
real estate is referred to as personal property.
The India Valuation Standards Committee recognizes
the following four property types: real property, personal property,
businesses, and financial interests. see also Bundle of Rights, personal
property, Real property. |
General Concept and principles 2 |
|
40 |
Property Plant and Equipment (PP & E) |
i) Assets intended for use on a continuing basis
in the activities of an enterprise including land and buildings, plant
and equipment, accumulated depreciation, and other categories of assets,
suitably identified.
ii) Tangible assets that: a) are held by entity for
use in the production or supply of goods or services, rental to others,
or for administrative purposes; and b) are expected to be used during
more than one period. |
General valuation Concepts and principles |
|
41 |
Real Estate |
Physical land and all things that are a natural
part of the land as well as those items which are attached to the land
by people
See also Improvements, Land, Real property. |
General valuation Concepts and Principles, Property Types. |
|
42 |
Real Property |
A legal concept referring to all the rights,
interests, and benefits related to the ownership of real estate. An
interest in real estate is normally recorded in a formal document, such
as a title deed or lease.
See also property, real estate. |
General valuation Concepts principles, Property Types. |
|
43 |
Replacement
Cost (new) |
i) The cost of replacing an asset. With an equally
satisfactory substitute asset.
ii) Normally derived from the current acquisition
cost of a similar asset, new or used, or of an equivalent productive
capacity or service potential
Replacement cost assumes the use of modern
materials, techniques, and designs.
See also Reproduction cost. |
General Valuation Concepts And Principles GN4,GN6 |
|
44 |
Reproduction
cost (New) |
The current cost of an identical new item. The
current cost of constructing a replica of the existing structures,
employing the same design and similar building materials.
In the market for fine art, reproduction cost is
equivalent to the cost of creating a facsimile of the original item.
See also cost approach for valuing Fine Art,
replacement cost. |
General Valuation Concepts and principles, GN 4
GN 6.
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|
45 |
Reserve price |
The lowest acceptable price fixed by the vendor. |
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46 |
Residual value |
The net amount which an entity expects to obtain
for an asset at the end of its useful life after deducting the expected
costs of disposal. The remaining value of an asset at the end of a
prescribed time ( in this definition residual value is similar to scrap
value). |
IAS16,6;IA
S38,7;IPSA
S 17,12
|
|
47 |
Sales comparison approach |
A comparative approach to value that considers the
sales of similar or substitute properties and related market data and
establishes a value estimate by processes involving comparison. In
general, an appraised property is compared with sales of similar
properties that have been transacted in the open market. Listing and
offerings may also be considered.
A general way of estimating a value indication for
personal property or an ownership interest in personal property, using
one or more methods that compare the subject to similar properties or to
ownership interests in similar properties .This approach to the
valuation of personal property is dependent upon the Valuer’s market
knowledge and experience as well as recorded data on comparable items.
Also called comparable sales method |
General Valuation Concepts and principles GN5.
|
|
48 |
Salvage Value |
The value of a property, excluding land, as if
disposed of for the materials it contains, rather than for continued use
without special repairs or adaptation. It may be given as gross or net
of disposal costs and, in the latter case, may equate to net realizable
value. It is the expected value, of the asset at the end of its economic
life. The concept of salvage value is that the asset is valued for
salvage disposal rather than for its originally intended purpose. |
In VS 2, |
|
49 |
Scrap Value |
The value a wasting asset will have at the end of
its predictable life, as known or ascertainable at the time when the
asset was acquired or provided by the person making the disposal |
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|
50 |
Tangible Assets |
Assets with a physical manifestation. Examples
include land and buildings, plant and machinery,
Fixtures and fittings, tools and equipment, and
assets in the course of construction and development. |
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|
51 |
Useful Life |
Either
[a] the period over which a depreciable asset is
expected to be used by an entity ;or [b] the number of production or similar units
expected to be obtained from the asset by the entity. |
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52 |
Valuation Report |
A document that records the instruction for the
assignment the basis and purpose of the valuation
And the results of the analysis that led to the
opinion of value. A Valuation Report may also explain the analytical
processes undertaken in carrying out the valuation, and present
meaningful information used in the analysis. Valuation Reports can be
either oral or written. The type, content, and length of a report vary
according to the intended user, legal requirements, the property type,
and the nature and complexity of the assignment. The terms, valuation
certificate and Valuation report, are sometimes used interchangeably.
The term valuation certificate, designates a document in which the
valuer certifies the amount of the valuation of the property. The
valuation certificate is usually a short letter, though it may also take
the from of a detailed report. it includes the valuation date ;purpose
of the assignment; date of the certificate; assumption upon which the
valuation is based; and the name address, and qualification of the
valuer.
Certification of value is used as a statement in
which the valuer affirms that the facts presented are correct, the
analyses are limited only by the reported assumptions, the Valuer’s fee
is not contingent upon any aspect of the report, and the Valuer has
performed the valuation in compliance with ethical and professional
standards.
See also Minimum Contents of a valuation Report. |
InVS3, |
|
53 |
Valuation standards
|
The Indian Valuation Standards and The
international valuation standards unless otherwise specified. |
|
|
54 |
Value |
The price most likely to concluded by the buyers
and sellers of a good or service that is available |
General Valuation
|
|
55 |
Valuer |
One who possesses the necessary qualifications,
Ability, and experience to execute a valuation.
Licensing is required before one can act as a
valuer. See also professional property Valuer, Competence of valuer. |
Code of Conduct, Competence of Valuer. |
|
56 |
Written Report |
The results of a valuation communicated to a client
in writing, which includes electronic communication. Written reports may
be detailed narrative documents containing all pertinent materials
examined and analyses performed to arrive at a value conclusion, or
abbreviated narrative documents, including periodic updates of value,
forms used by governmental and other agencies, or letters to clients. |
In VS 3, |
