Red, White or Blue? Colouring Valuersí perceptions

The issue of guidance and regulation of valuersí practice is topical. As identified by the authorsí previous papers (2000a, 2000b) the dream of convergence in valuation practice is far from being realised. Yet, the ambition for consistent bases of valuation remains an ambition of national and supra-national bodies. Indeed it is increasingly important given the continuing rise in cross-border property transactions. Within the last 12 months, notable changes have occurred within the compulsory and best practice guidance given to valuers. In July 2000 the International Valuation Standards Committee (IVSC) issued revised guidance and in November the European Group of Valuersí Association (TEGoVA) published the 4th Edition of their European Standards. The Royal Institution of Chartered Surveyors (RICS) in its Red Book is consistently reviewing advice to practitioners with the last amendments being in November 2000. Some of these revisions are part of the ongoing overhaul of all standards. However, some of the developments have been driven by changes in accounting standards and their application. It was these, specifically, that led the RICS to re-issue its mandatory practice statement on company accounting valuations in March 2000. The authors have a particular interest in this area in relation to both public and private sector assets and last year explored some of the preliminary effects of the accounting changes. What has become increasingly clear is that there is a lacuna between the recognised bases for asset valuations as between the three major bodies (RICS, TEGoVA and IVSC). The area in which this is most apparent is the acceptance, or otherwise, of EUV (existing use value). This is recognised by both TEGoVA and RICS but not internationally. Indeed, the very concept of EUV has been criticised by, inter alia, Dunckley (2000) and the authors. It is also inconsistent with International Accounting Standards. This paper will seek to explore whether the abandonment of EUV in international guidance is presenting difficulties in relation to properties that have to be valued for accounting purposes but for which there is little or no ready market. It is contended that if market value is the only acceptable approach to accounting valuations, this will have implications for corporate entities and may give their advisers some practical problems. If EUV is abandoned it also calls into question the appropriateness of DRC (depreciated replacement cost) as a valid ësurrogateí of market value. To assist in unravelling these issues, the authors are undertaking a series of by in-depth interviews with: international consultancy firms; professional body representatives; and corporate bodies. // The interviews will be concluded in time for findings to be reported to the conference together with the authorsí views on the likely future abandonment of EUV within the European context.