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As we have seen from the previous chapter it is not possible to consider the latest proposals for accounting for inflation (the Hyde Guidelines) in isolation. We must keep in mind that these proposals have been developed from the earlier recommendations put before the accounting profession in recent years. In order to consider fully the practical aspects of accounting for fixed assets and stock it is my intention in this chapter to concentrate on the proposals contained in Exposure Draft 18 on Current Cost Accounting and then to compare them with the Hyde Guidelines.

When valuing “no market” properties using the cost approach, one of the fundamental problems is the reflection of “age‐related” depreciation in the appraisal process. The uncritical use of straight‐line depreciation produces illogical results and a new methodology “discounted assets rent” (DAR) is introduced to overcome these difficulties: site values based on existing use should not be depreciated per se in the process. A new software program (DAR) has incorporated these facilities as a “user‐friendly” valuation tool.

Monetary conditions necessary for equilibrium:[Keynes] “A Treatise on Money,” Vol. I, Books 3 and 4Robertson's “Banking Policy and the Price Level”Hayek's “Prices and Production”Marshall (short period of equilibrium: quasi-rent – supplementary cost, Book V, Chapters 4, 5, 9)Harrod, The Economic Journal, June 1930, “Notes on Supply”Kahn, The Economic Journal, June 1931, “Relation of Home Investment to Unemployment”

The paper aims to address concerns that valuers' choice of depreciation models in their cost approach to value is not sustainable (is incapable of preserving patronage in present and future generations).

The paper draws up conceptual expectations regarding how seven UK and US depreciation models pass or fail four identified sustainability indicators: reliability, consistency, usability and separate treatment of depreciation components. Valuation surveyors in Nigeria were offered as a case study of how valuers in one country respond to such conceptual investigations.

The study found that cross‐sectional models, the breakdown model and hedonic modeling are the depreciation models perceived as most sustainable. However, popular model use follows easiest models rather than most sustainable models.

The paper suggests that the pursuit of sustainability in valuation modeling should involve provision of institutionalized best practice guidance beyond that currently provided so as to assist valuers/appraisers in more sustainable choices.

The paper is probably the first to address both UK and US depreciation models and to assess each using defined sustainability criteria.

Discusses the valuation “public sector assets” comprising public parks, infrastructural assets (roads, drains, water supply, etc.), hospitals, schools, universities and the like; and takes a passing look at the modern public sector accounting practices which appear to create a need for such valuations. The question about Cwhether or not accounting and valuation technicians and definitions which are applied to private sector profit making commercial organizations can be applied to public sector non‐profit making entities is also examined. Since, in most cases, there is no market for such assets does a valuation serve any useful purpose in any accounting, accountability or management framework? Indeed, are the utilities used by public sector organizations strictly “assets” as that term is normally understood? What “bundle of rights” attaches to such public facilities as parks and roads? To the entity responsible for the provision and maintenance of such “assets” are they not more in the nature of liabilities?

Outlines a new classification system for buildings and proposes that a new methodology, discounted asset rents (DAR), is used to address the situation. Notes that it has long been accepted that cost can be a valid basis for valuing ‘no market′ properties. Mentions the contractors test, as used in rating, and techniques for ascertaining depreciated replacement costs. Finally a practising valuer comments on the findings of the research.

The problems of implementation which bedevilled, and ultimately killed, the ambitious and comprehensive approach of ED 18 have been referred to earlier in this book and, in any case, are well documented in the financial and professional press.

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.

The purpose of the article is to discuss how the demand for disclosure regarding property valuation in financial reports can be fulfilled.

The starting point is the generally established methods for property valuation and the different types of data that they need. From this it is deduced what kind of information that it is necessary to supply.

An important conclusion from the research reported in this paper is that disclosure regarding applied methods, significant assumptions in property valuations and statements about the connections between appraised values and market evidence needs refinement in financial reports, according to International Financial Reporting Standards (IFRS). As the uncertainty in property valuations cannot be removed, it has to be managed. Providing explicit disclosure about valuations is one important way to manage this issue by reducing the gap of information asymmetry between those who perform valuations and those who are users of financial statements.

Providing high quality disclosure on these issues would make analysis and the application of individual judgement by users of financial reports far easier. Findings reported in this paper imply that many companies have not so far found the right balance between cost and benefits regarding what amount of disclosure would be appropriate on this issue in financial reports.

The detailed discussion about what information that should be disclosed concerning property valuation is an original contribution of the paper.