COMPONENT 4.

2
A P P R O A C H T O
DEVELOPING THE PHILIPPINE VALUATION STANDARDS
Objectives
Provide consistency & understanding between
providers & users of valuations
Raise the quality of public & private sector valuations
& reporting
Promote transparency & reliability of valuations
Reduce financial risk for users of valuations
Review of existing national, regional & international
Standards
Existing Standards used in the Philippines (private sector)
Uniform Standards of Professional Appraisal Practice (USPAP)
International Valuation Standards (IVS)
Royal Institution of Chartered Surveyors (RICS) Red Book
ASEAN Valuation Standards?
Aus/NZ Professional Practice
The European Group of Valuers Associations (TEGOVA)
A P P R O A C H T O
DEVELOPING THE PHILIPPINE VALUATION STANDARDS
Operational Considerations
Harmonized with the IVS
Vigorous technical review by a TWG & exposure to
stakeholders
Upon completion, it shall be endorsed &
promulgated by the DOF Secretary
Standards to be adopted initially by the Public Sector
& the Private Sector expected to follow
A P P R O A C H T O
DEVELOPING THE PHILIPPINE VALUATION STANDARDS
PVS Draft
Philippine
Valuation
Standards
Technical
Review &
Exposure
PROCEDURES FOR THE DEVELOPMENT OF THE PHILIPPINE VALUATION STANDARDS
A FOUR-STAGE PROCESS
Maintenance &
Revision
Approval &
Implementation
1 2
3
4
WHAT ARE STANDARDS?
Standards ARE statements of:
Recognised principles & concepts
Best practices in valuation services & reporting
Accepted definitions
They do NOT:
XDescribe different valuation techniques
XPrescribe specific methods of valuation for different
purposes
XTell valuers how to value!
THE PHILIPPINE VALUATION STANDARDS
overview
WHAT CONSISTS THE STANDARDS?
I. Fundamentals
II. Core Standards
III. Application Standards
IV. Guidance Notes
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I . F U N D A ME N T A L S
1. CONCEPTS FUNDAMENTAL TO GAVP
Foster understanding among professional disciplines & to
alleviate difficulties arising from language barriers
Define and explain basic valuation terms & concepts (eg,
Real Estate; Real Property; Personal Property; Asset; Market Value;
Price; Cost &Value; Highest & Best Use)
Provide commentary on basic, legal, economic, & conceptual
frameworks which serve as basis of the valuation discipline and
its standards
3 market-based valuation approaches:
1)Sales Comparison
2)Income Capitalization
3)Cost
2. CODE OF CONDUCT
Addresses the ethical & competency requirements
of Valuers
Serves the public interest
Ensures that the results of valuations are reliable,
consistent, & unbiased
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I . F U N D A ME N T A L S
3. PROPERTY TYPES
Real property
Personal property
Businesses
Financial interests
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I . F U N D A ME N T A L S
THE PHILIPPINE VALUATION STANDARDS
core standards
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I I . C O R E S T A N D A R D S
1. MARKET VALUE BASIS OF VALUATION
Market Value is the estimated amount for which a property should
exchange on the date of valuation between a willing buyer and a
willing seller in an arms-length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently, and
without compulsion.
2. BASES OTHER THAN MARKET VALUE
3. VALUATION REPORTING
THE PHILIPPINE VALUATION STANDARDS
valuation
applications
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I I I . V A L U A T I O N A P P L I C A T I O N S
1. VALUATION FOR FINANCIAL REPORTING
A direct extract from the International Accounting
Standards (IAS) & International Financial Reporting
Standards (IFRS)
Defines & categorizes assets (including land &
buildings, machinery, etc) for accounting purposes
2. VALUATION FOR SECURED LENDING PURPOSES
Reduces risk through exposure to inaccurate
valuations used by the banking sector.
3. VALUATION OF PUBLIC SECTOR ASSETS FOR
FINANCIAL REPORTING
Explains the requirements for valuing assets owned
or controlled by government or quasi-government
bodies
Measures public assets at either Historic Cost
(less accounting depreciation) or Fair Value (i.e.,
mark-to-market value)
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I I I . V A L U A T I O N A P P L I C A T I O N S
THE PHILIPPINE VALUATION STANDARDS
guidance notes
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
1. REAL PROPERTY VALUATION
Summarizes the appraisal process & minimum
requirements to arrive at a reasonable & realistic valuation
3 approaches to value (Cost, Income, Sales Comparison)
Market value, HABU, etc.
2. VALUATION OF LEASE INTERESTS
Explains leasehold interests & the bundle of rights
Shows the hierarchy of rights & interests inherent in the
leasehold
3. VALUATION OF PLANT, MACHINERY & EQUIPMENT
Common approach to value is by Depreciated Replacement
Cost [Replacement Cost New Less Depreciation (RCNLD)]
4. VALUATION OF INTANGIBLE ASSETS
Discusses intellectual property rights, patents, trademark,
goodwill, franchise, legal life of intangible asset, etc.
Provides the basis for comparison with other types of
valuations
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
5. VALUATION OF PERSONAL PROPERTY
Provides guidance on the valuation of personal property
(eg, works of art, antiques, collectibles, furniture, fixtures & fittings,
equipment, etc.)
6. BUSINESS VALUATION
Covers the valuation of businesses for the purpose of
shareholdings, acquisitions & disposals
Shows the relationship between the property assets as part
of a going concern & the overall value of the business
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
7. CONSIDERATION OF HAZARDOUS & TOXIC SUBSTANCES IN
VALUATION
Provides guidance for situations where environmental
conditions may have an adverse effect on property values
Particularly relevant to land-fill sites, & residential areas
affected by industrial pollution (fumes & smell from waste dumps,
etc.) & power transmission lines
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
8. THE COST APPROACH FOR FINANCIAL REPORTING (DRC)
The basic guidance for DRC valuations: defines physical,
functional & external obsolescence
Introduces the concepts of subject to adequate
profitability & service provision (in the case of public
buildings)
NB: These are concepts for financial reporting rather than
for Real Property Taxation (RPT).
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
9. DISCOUNTED CASH FLOW (DCF) ANALYSIS FOR MARKET
VALUATIONS & INVESTMENT ANALYSES
Provides the approach in valuing businesses & certain
types of investment properties
Emphasizes the level of expertise & specialists skill
required in undertaking such valuations
10. VALUATION FOR AGRICULTURAL PROPERTIES
Provides guidance on valuation related to crop production
Provides guidance on categorizing non-realty elements &
on adopting different valuation approaches for different
asset elements
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
11. REVIEWING VALUATIONS
Distinguishes between administrative (compliance), desk,
field, technical, & valuation reviews
Explains the purpose of the review as a reference point (eg,
for senior valuers carrying out informal reviews of their staffs work)
12. VALUATION FOR TRADE RELATED PROPERTIES
Relates to valuation of hotels, gas stations, restaurants, etc.
Provides that the DCF is the normal approach adopted for
individual valuations of these properties
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
13. MASS APPRAISAL FOR PROPERTY TAXATION
Discusses the methodology for Ad Valorem Property
Taxation, or statistical and economic studies under
government administrative programs
Recognizes that valuations undertaken for taxation
purposes are carried out in compliance with local laws &
regulations.
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
14. VALUATION OF PROPERTIES IN THE EXTRACTIVE INDUSTRIES
Differentiates between mineral extraction & the petro-
chemical industry in accordance with the UN Framework
Classification
Provides a general explanation of the industries &
terminology used
Differentiates between 4 categories: exploration, resource,
development, & production properties & emphasizes the
specialist nature of quantifying reserves, etc.
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
15. VALUATION OF HISTORIC PROPERTY
Provides guidance on valuing heritage properties
Justifies the 3 valuation approaches as applicable to the
type & use of the property being valued (eg, functional,
income producing, monumental, etc.)
P H I L I P P I N E V A L U A T I O N S T A N D A R D S
I V . G U I D A N C E N O T E S
THE PHILIPPINE VALUATION STANDARDS
approval &
implementation
PROCEDURES FOR THE DEVELOPMENT OF THE PHILIPPINE VALUATION STANDARDS
APPROVAL & IMPLEMENTATION
Approved by
DOF
Adopted by
LGUs
For General
Valuations
For Real
Property Tax
Valuations
Exposure to
NGAs
Study
of a
Single
NGA
Accepted by
NGAs
Amend
Administrative
Orders / Rules &
Regulations
Draft 4 - Final Draft
(Standards After Exposure)
PROCEDURES FOR THE DEVELOPMENT OF THE PHILIPPINE VALUATION STANDARDS
APPROVAL & IMPLEMENTATION
BSP thru its Dept. of Loans & Credit (DLC), Asset
Management Dept.(AMD) and the Supervision & Examination
Sector (SES) agreed to adopt and implement the PVS
DLC & AMD revised its TOR incorporating the mandatory use
of PVS by their accredited appraisal companies
SES will be issuing a circular addressed to CEOs of member
banks thru the BAP on adopting the PVS
NGA STUDY
Thank You!