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In January 2005, the International Valuation Standards Committee (IVSC) published the International Valuation Guidance Note No. 8 entitled The Cost Approach for Financial Reporting – (DRC). This guidance note provides background to the use of depreciated replacement cost (DRC) in connection with International Valuation Application 1 (IVA 1), Valuation for Financial Reporting and suggests that the valuer reports the result of a DRC valuation as market value subject to the test of adequate profitability or service potential. This suggestion has caused a lot of debate and consternation in the UK where the DRC approach has always been considered as a method of last resort and not a market valuation. However, in continental Europe the cost approach (DRC) is often the principal method of valuation and has always been considered to produce market value. The purpose of this paper is to discuss the impact of this change to valuation practice in the UK.

In this paper, we discuss the concept of market value and its relationship to DRC in an attempt to identify the principal areas of concern in the UK and, through the use of an Italian case study, show how the DRC approach can be adopted as an appropriate method (not basis) for calculating Market Value.

It is probable that most valuers will still provide the DRC valuation using exactly the same calculation as they did before. They are likely to provide the same (relative to the valuation date) figure; the difference is that they will feel less easy about the robustness of that figure

It is argued that the UK market has, for too long, hidden behind DRC being a basis of value that UK valuers now feel uncomfortable in reporting DRC as market value. They are uncertain with the valuation figure. However, this uncertainty can be addressed in other ways and a suggested “solution” to help the valuer overcome their discomfort with the market valuation is proffered.

In the context of the financial crash and the commercial property market downturn, the purpose of this paper is to examine the basis of valuation used in the UK commercial property lending process. Post‐crisis there is discussion of countercyclical measures, including the monitoring of asset prices; however there is no consideration of a different approach to property valuation. This paper questions this omission, given the role that valuations play in the bank regulatory process.

The different bases of valuation available to lenders within international valuation standards are identified as market value (MV), mortgage lending value (MLV) and investment value (IV), with MV being the most used in the UK. Using the different bases in the period before the financial crisis, the UK property market is modelled at a national office, retail and industrial/warehouse sector level to determine the performance of each alternative valuation basis within the context of countercyclical pressures on lending.

Both MLV and IV would have produced lower valuations than MV, although there are some practical issues involved in adopting the different bases for the bank lending.

The use of a different valuation basis could provide lenders with tools for more informed and prudent lending.

The causes of valuation inaccuracy, the approaches, basis and procedures used for value estimation were not profoundly identified in Ethiopia. Particularly, the causes of property valuation inaccuracy for court decisions have not been assiduously studied by scholars. Hence, the ultimate goal of this study aims to identify the determinant variables of valuation inaccuracy, the approaches, basis and procedures used for court execution purposes.

This study employed both qualitative and quantitative approaches. The target populations of the study were the courts at the federal and regional levels. A purposive sampling technique was employed to undertake this study. The survey data was analyzed using the Relative Importance Index (RII).

The finding of this research revealed that courts have not outshined and uniform valuation manuals and guidelines that clearly state the approaches, procedures and bases of valuation. As a consequence, courts execute based on the opinion of value determined by other institutions. The insignificant numbers of independent valuation institution with the lack of uniform standards in the country prejudice the implementation of the decision of the court and faced injustice. The finding also reveals as there are several causative variables for real property valuation inaccuracy.

To alleviate the problem, the government should strengthen the valuation sector by creating an independent institution for advancing valuation regulation and policymaking.

This study was the first of all and could be a pointer for different government and non-government bodies regarding the limitations of valuation for judgment execution purposes.

This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. It is argued that this lack of awareness may have implications for the practices of valuation by professional accounting firms that are currently observed in the UK. An examination of the theory of company valuation shows that there is widespread agreement on the basic principle of the approach to be followed in valuing the shares in a company; in short, it is the present value of the company's future cash flows. Although there is debate over issues such as the appropriate model to be used in pricing risk, and how to allow for the impact of taxation in arriving at the discount rate, this principle appears to be universally accepted. Although some investigations have been carried out into the practical context of company valuation in the UK (Arnold and Moizer 1984, Moizer and Arnold 1984, Day 1986, and Keane 1992), no attention has been paid in the economics and accounting literature to the legal context. This is perhaps surprising given that the courts are sometimes important users of company valuation reports. This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. Historically, one of the features of the English commercial courts has been their refusal to become involved in matters of commercial judgement. English judges have held themselves to be sophisticated technicians in law but self‐professed amateurs in commercial matters. Their role has been to hear expert witnesses and to weigh up their professional advice. This contrasts with the position in continental courts; for example in France, the judges sitting at first instance in the lower commercial courts are businessmen and women rather than lawyers, with the result that their approach and findings are likely to be less legalistic and more commercial. This English legal approach needs to be seen in the context of an increasing concern with valuation attributable to the changes brought about by Sections 459 to 461 of the Companies Act 1985, together with the recent case law. Section 459 of the Act is concerned with minority unfair prejudice actions and under that section a member may petition the court for an order on the grounds that the petitioner's interests have been, are being or will be unfairly prejudiced by the conduct of the company's affairs. A considerable body of case law has built up on what constitutes unfairly prejudicial conduct. Under section 461 the court may make such order as it thinks fit for giving relief including the purchase of the shares of any member of the company by other members or by the company itself. Here the crucial question for the courts and for the parties negotiating a buy‐out in the shadow of the courts is the amount of the valuation and the factor to be taken into account in reaching that valuation. In such circumstances, it might be expected that there would be considerable concern with the basis of the valuation. However, ‘basis’ can have several different meanings; in the first place, it could be defined as asset basis, in the sense that a valuation may be concerned with the replacement, ‘going concern’ or realisable value of the firm's assets. Second, there is a need to define what economic model has been used to derive the ‘going concern’ or economic value; it may be helpful to describe this as the economic model basis of the valuation. Third, there is the question as to whether the proportion of the equity held affects the value; this might be termed the control basis. As we show below, the concern of the theoretical literature is primarily with the second category, whereas the case law tends to concern itself with the first and third categories. In order to clarify the theoretical and practical considerations involved, the first section of this paper briefly reviews the theory of equity valuation and the second contrasts this with the rather limited evidence on UK valuation practice. In the third section, the legal issues involved are explained and the way in which the courts proceed in cases which involve the valuation of shares are reviewed. Although the courts rely on expert evidence in making a valuation, certain principles and guidelines for valuation are laid down by the courts, and these are analysed and contrasted with the prescriptions on valuation found in the finance literature.

Examines the evolution of the Contractor′s basis of valuation for rating, the valuation framework currently adopted and the definitions that have emerged from litigation; considers the need for a review of the elements of the valuation framework in the light of recent economic changes and a more accurate approach to quantification. Discusses a possible solution proposed by the Government within the context of England and Wales and also in the light of the Contractor′s Principle in Scotland.

This paper reviews a number of alternative bases of valuation which can be applied for lending purposes. In early 1999, the European Mortgage Federation suggested that the philosophy of a European Mortgage Lending Value (EMLV) should be based on “sustainable” values and this recommendation is compared to the current basis used for bank lending valuations, mainly market value. This comparison is of both concepts and applications. In addition, concepts and applications of worth valuations are considered. The paper concentrates on commercial property but many of the principles also apply to residential property valuations. The paper concludes that the EMLV concept of sustainable values is itself unsustainable. There are a number of reasons for this view, not least that the concept itself cannot be closely defined and will be interpreted differently by those who apply it. It lacks the objectivity of market value and the rationality of concepts of worth. The paper also questions whether any concept of value can apply over a period of time and suggests that all other “values” do not have a shelf life and relate to one specific point in time only. In application, in the absence of any meaningful conceptual basis, sustainable value appears to have been applied as a conservative market value. It may give the illusion of having some extended time horizon attached to it but this is the major danger. The reality is that it is just another product of the endless search for a single valuation figure which can give lenders the holy grail of longer‐term protection from lender default. This it will fail to do as all other bases applied so far to lending valuations have done. The recommendations of this paper are that all European institutions and valuer/appraisers resist this latest incursion into the fruitless search for the perfect loan valuation basis and concentrate on the other aspects of the valuation which can truly help lenders make their decisions. These are the economic, property market and occupier issues which should be considered by the appraiser and included as major items in valuation reports, many of which would be explicitly included in a full discounted cash flow approach to commercial property loan valuations.

Market value is an estimation of price in the market. It is value in exchange. The valuer's role is to determine the appropriate approach, the method and use the right model to achieve this aim as best as possible. However, underpinning all valuations and property analysis are valuation standards and definitions. This paper looks at the definition of market value and how some market participants may misunderstand or even misrepresent it. This is particularly true when there is a downturn in the market.

This practice briefing is an overview of the role of market value as a definition of price and how it is often misused by stakeholders in the property market.

This briefing is a review of the valuation definitions clarifying what they mean and what they do not mean.

The role of the valuer in practice is to use the appropriate definition for the task in hand. The understanding of those definitions is central to the valuation process.

This provides guidance on how valuation definitions can be presented to the client in accordance with the International Valuation Standards.

In the last few years a number of large operational companies in the United Kingdom have chosen to segregate the management of their property holdings from the day‐to‐day running of their core business. This has either been achieved by forming property sections within the main company structure, or in some cases the hierarchy has been more clearly defined by the formation of subsidiary companies feeding into the parent company. The operational arm would then pay the property subsidiary an open market rental for each property that they occupy. The advantage of separating the property function from the core business is twofold. First, it allows the performance of each operational outlet to be measured on the same basis; and second, the investment performance of the properties themselves can now be measured. However, for the latter to occur, the properties need to be valued as investments and not as owner occupied. Under current RICS regulations this is not allowed and any property subject to an inter‐company let must be valued as if the lease agreement did not exist. Investigates the effect of the RICS guidelines on the valuation of properties let to related companies and highlights the problems of measuring the performance of the company′s property assets against a suitable benchmark.