Editorial

Citation

Finch, E. (2007), "Editorial", Facilities, Vol. 25 No. 1/2. https://doi.org/10.1108/f.2007.06925aaa.001

Editorial

What do auditors and valuers do? Does their activity have any relevance to the facilities management community? Indeed, does facilities management have anything to offer these professions? Prior to an invitation to run a workshop by the Slovenian Institute of Auditors, the question had never crossed my mind. For a country that has moved from a socialist economy to one that is now firmly established under the free-market system, Slovenia like many other neighbouring countries in Europe, is having to grapple with issues of value and worth. At this point in time, such issues are being addressed by accountants, real estate valuers and auditors. Facilities management as such, is almost unknown as a discipline. Yet many of the questions facing valuers rely on the input of facilities management professionals.

The key debate in this area is the question of “fair value” and what it means.

“The fair value of land and buildings is usually its market value. This value is determined by appraisal normally undertaken by professionally qualified valuers.” IAS 16, Clause 30[1]

So far, so good. No complications there. However, the measurement of value may not be reflected in its market value. For example, a highly bespoke building may have a lower market value compared to the value to the organisation. This results from specific design details and specifications that, whilst delivering value to the specific business, may not be attractive to the prevailing market.

“The fair value of real estate included among the assets of a corporate enterprise may consider the contribution of the real estate to the enterprise (its value in use)” (IVSC, 2000a, p.41)[2]

This therefore moves onto the concept of “value in use”. This is an interesting concept, since it identifies the value of an asset over and above market value. One might consider this an appropriate yardstick for measuring the performance of the facilities manager. To some extent it reflects the “value added” element provided by the FM brought about by design and service innovations. However, this might be a dangerous approach, should one end up with a building that has absorbed heavy investment which is not realisable in the event of a sale.

As indicated by the Institute of Valuers, this concept of value in use is contextual and specific to the organisation.

“Value in use is the present value of estimated cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. It is the value that a specific property has for a specific use to a specific user. It is therefore, non-market related. It is an estimate of worth to the enterprise.” (IVSC, 2000a, p.106)

The workshop, organised by Dr Alenka.Temeljotov in Ljubliana, served to illustrate the potential for knowledge exchange between professions. It also highlighted the emergent need of countries such as Slovenia to embrace concepts embodied in facilities management.

Edward Finch

Notes

1. IAS 16 is an international accounting standard. Its objective is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the timing of recognition of assets, the determination of their carrying amounts, and the depreciation charges to be recognised in relation to them. Objective of IAS 16.

2. International Valuation Standards available from www.ivsc.org/standards.