Search results

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.

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.

The purpose of this paper is to provide a real asset management investment appraisal of the performance of containerships as a primary segment within international shipping, to facilitate Islamic equity investment through a shipping fund. The objectives are to evaluate the risks and returns of shipping under the framework of Islamic equity finance, and to analyze the performance of investing in containerships over the long term, to appeal to retail and institutional clients of Malaysian asset management institutions.

Accordingly, the methodology adopts an investment analysis of a full population of historical data over a period of 20 years, to evaluate performance involving a maritime return on investment (MROI), internal rate of return (IRR), net yield and standard deviation measures of risk and return.

The findings reveal that while earnings are volatile in comparison to capital market expectations, unlevered, tax-free returns on containership investments outperform financial and other real assets.

Shipping is a strong growth industry with about 84 per cent of global trade carried out by the international shipping industry. The problem is that many Islamic asset management institutions and investors have essentially no exposure to Islamic investment in international shipping.

However, shipping is a highly capital-intensive industry, and currently 75 per cent of ship lending has been conducted by European banks and financed on a conventional basis. Post-financial crisis, ship owners, ship lenders and shipyards have all been exposed to the impact of over-levered balance sheets and debt finance. There is a demand for alternative sources of finance.

By communicating risk and reward more effectively, retail and institutional investors, as well as Islamic finance institutions, will realize that the social benefit of equity finance on the basis of profit sharing is more efficient at allocating investible resources than debt finance at interest, thereby increasing investment and economic growth.

The significance is that Islamic equity finance, rather than debt at the time-value of money, should enhance the development of international shipping.

The purpose of this paper is to discuss how reproductivity (child‐rearing) fits into ethics. It aims to use objectivist ethics (OE) specifically as the framework for considering this.

The approach is conceptual in nature. Economic concepts are used to analyze and extend an ethical issue and the cardinal values within OE, which includes productive purpose, are reviewed.

The paper argues that reproductivity is sufficiently different from productivity to be a separate category. Then using the trader principle, the objectivist case for inheritance, and capital theory, the case is made that reproductivity is required of each person in the same sense that productivity is.

This is an original argument made by the author in Then Athena Said: Unilateral Transfers and the Transformation of Objectivist Ethics. In that work, reproductivity is linked to human capital replacement, depreciation, the sinking fund, and Irving Fisher's conception of standard income. This paper also relates it to permanent income. Also, the conclusions are more inclusive than those in the previous work in that other forms that the replacement of human capital can take in addition to reproduction are considered.