Mantra

1. Valuation process is becoming more codified & scientific,

valuation will always involve judgement based on experience of
the valuers & would still be based upon :
a. Assumptions
b. Limiting conditions
c. Date
d. Investigations
e. Data
f. Approach & Methodology
g. Value conclusion
h. Reporting

LEARN, ASSESS ANALYSE, DOCUMENT, DISCLOSE WITH

TRANSPARENCY
 Valuation Reporting – IVS3
•Final Step in the Valuation Process
• Communicates the value conclusion &
confirming the
• basis of the Valuation
• purpose of the Valuation
• Any Assumptions or limiting conditions
• Analytical process & empirical data used
• (procedures & evidence used to conclude)
 Valuation Report
• Valuation Certificate
• Valuation Report
• Report & its importance
• Good Report
• Bad Report
 Good Report
Credible & Effective Report
IBC – Perspectives of IP
Experience in Court Valuations
Present thinking in Committee
 Companies Act 2013 – 8 Conduct of Valuation
8(1)The registered valuer shall, while conducting a valuation,
comply with the valuation standards as notified or modified
under rule 18:
CHAPTER V VALUATION STANDARDS

18. Valuation Standards.─ The Central Government shall

notify and may modify (from time to time) the valuation
standards on the recommendations of the Committee set up
under rule 19.
Provided that until the valuation standards are notified or
modified by the Central Government, a valuer shall make
valuations as per-
(a) internationally accepted valuation standards; \
(b) valuation standards adopted by any registered valuers
organization
IBC Rules Chapter IX Resolution Plan
Section 35
(1) Fair value and liquidation value shall be
determined in the following manner:-

(a) the two registered valuers appointed under

regulation 27 shall submit to the resolution
professional an estimate of the fair value and of
the liquidation value computed in accordance with
internationally accepted valuation standards, after
physical verification of the inventory and fixed
assets of the corporate debtor;
IBC Rules Chapter IX Resolution Plan

(b) if in the opinion of the resolution professional,

the two estimates of a value are significantly
different, he may appoint another registered
valuer who shall submit an estimate of the value
computed in the same manner; and

(c) the average of the two closest estimates of a

value shall be considered the fair value or the
liquidation value, as the case may be.
IP Rules Chapter IX Resolution Plan
(2) After the receipt of resolution plans in accordance
with the Code and these regulations, the resolution
professional shall provide the fair value and the liquidation
value to every member of the committee in electronic form,
on receiving an undertaking from the member to the effect
that such member shall maintain confidentiality of the fair
value and the liquidation value and shall not use such
values to cause an undue gain or undue loss to itself or
any other person and comply with the requirements under
sub-section (2) of section 29:

(3) The resolution professional and registered valuers

shall maintain confidentiality of the fair value and
the liquidation value.”.]
IOV RVF Resolution on Standards
Till Ind VS and or IOV RVF
standards are in place, it is
mandatory that all IOV RVF
members shall follow IVS in all
Valuations done for statutory
purposes if an RV is required to
Value a property
 Ind VS
Is mandatory after it comes into
existence
Till Ind Vs is in place IOV RVF
has adopted IVS
IVS is mandatory now for
Companies Act , IBC
IVS is recommendatory for SEBI,
Income Tax & FEMA, REIT
 IVS 2017
Introduction Page 1-2
Glossary Page 3-5
IVS Frame Work Page 6-7

General Standards Page 9-48

Asset Standards Page 49-99
Index Page 108-115
 IVS- Structure
THREE PRINCIPAL ELEMENTS OF IVS

1. STANDARDS
2. APPLICATIONS
3. GUIDANCE NOTES

Each one is comprehensively dealt separately in IVS

Each one is given equal importance
 IVS- Structure
Three Principle Elements of IVS have equal weight.
All Valuations which are IVS compliant must confirm to
the principles & procedures elaborated throughout the
entire document
1. Standards – Each Contains 9 Sections (Address rel area)
2. Applications – Each Contains 9 Sections (IV Application)
3. Guidance Notes – Each GN Contains 6 Sections

9 sections of 1&2 include

Introduction, Scope, Definitions, Relationship to AS, Statement of
Standard, Discussion, Disclosure Requirements, Departure
provisions, Effective Date
6 Sections of 3 : Introduction, Scope, Definitions, Relationship to
AS, Guidance, Effective Date
 IVS- GNs
3 groups
1) 4 GNs address Considerations specific to Property categories
- Real Property, Lease Interests, P&M, & Personal property
2) 3 GNs deal with property or assets valued on Cash flow
(Intangibles, Businesses & Specialised Trading Property)
3) 2 GNs guide in application of Valuation Methodologies
CA for FR (DRC)
DCF
Remaining 5 GNs
Environmental issues – 1
Specialised Property - 2 (agri properties, extractive ind)
Professional Practice - 1 (Review)
Cognate area of Val - 1 ( Mass appraisal for Pr Tx)
Total 15 GNs
 International Valuation Standards 2017
Introduction
Glossary
IVS Frame work
General Standards (for all 3 types of assets)
101 : Scope of Work
102 : Investigations & Compliance
103 : Reporting
104 : Bases of Value
105 : Valuation Approaches & Methods
 Asset Standards
IVS 200 Business & Business Interests
IVS 210 Intangible Assets
IVS 300 Plant & Equipment
IVS 400 Real Property Interests
IVS 410 Development Property
IVS 500 Financial Instruments
 IVS Framework - Departures
Circumstance where specific legislative, regulatory or
other authoritative requirements must be followed
that doffer from some of the requirements within
IVS. Valuer shall specifically state the
statutory/regulatory provisions that necessitate the
departure from IVS
• IVS 101 (Scope of Work),
• IVS 103 (Reporting)
Ex: A jurisdiction may require use of only Market
approach in a situation where IVS would indicate
that only Income Approach should be used
NOT Permitted Otherwise under IVS
 IVS 103 Reporting - Introduction
the valuation report
shall communicate the information necessary for
proper understanding of the valuation or valuation
review.
shall not be ambiguous or misleading and
shall provide the intended users - clear understanding
of the valuation or other advice provided.
comparability, relevance and credibility,
shall set out a clear and accurate description of the
scope of the assignment, its purpose & intended
use and disclosure of any assumptions, special
assumptions significant uncertainty or limiting
conditions that directly affect the valuation.
 Salient Features of a good report

Organisation : Logical – Each section – interrelated – should not

contradict – Demonstrative
The reader should come to the same conclusion as you are
Grammar & Spelling
Calculations & Mathematics
Appearance
 Valuation Report
• Essential that VR communicates necessary for proper
understanding of the Valuation or Review
• Must provide the intended user with a clear understanding of
the Valuation
• Must be clear & accurate
• Scope of the assignment,
• Purpose and intended use (including limitations on that use)
• Disclosure of any assumptions
• Special assumptions (IVS 104 S200.4)
• You can have a format of your own from Comprehensive
Narrative Reports to abbreviated summary Reports
• Details depend upon the complexity of the Property & user’s
requirements.
• Format should be agreed with parties in the scope
•
 General contents of a Valuation Report
• Scope of work IVS101
• Approach or approaches adopted
• Method or methods applied
• Key inputs used
• Assumptions made
• Conclusions of Value and principle
reasons for any conclusions reached
• Date of Report
•
 Contents
1. Identity of the Valuer
2. Disclosure
3. Client
4. Other Intended Users
5. The Asset
6. The Valuation Currency
7. Purpose of Valuation
8. Bases/Basis of Value
9. Valuation Dates
10. Nature & Extent of the Valuer’s Work & Limitations thereon
11. Nature & Sources of Information relied upon by the Valuer
12. Significant assumptions & or special assumptions
13. Type of Report being prepared
14. Restrictions on use distribution/publication
15. Compliance Statement
 IVS 101 Scope of Work
10 Introduction .
10.1 A scope of work describes the fundamental terms
of a valuation engagement such as
1. the asset(s) being valued,
2. the purpose of the valuation, &
3. the responsibilities of parties involved in the
valuation
 IVS 101 Scope of Work
10.2. This standard is intended to apply to a wide
spectrum of valuation assignments, including:
(Major Valuation assignments are grouped under)
(a)Valuations performed by valuers for their own
employers (“in-house valuations”)
a) Valuations performed by valuers for clients other
than their employers (“third party valuations”).
(c) Valuation reviews where the reviewer may not be
required to provide their own opinion
 101 Scope continued… 20. General Requirements

•20.1. All valuation advice and the work undertaken in

its preparation must be appropriate for the intended
purpose.
•20.2. It is important that the intended recipient(s) of the
valuation advice understands what is to be provided
and any limitations on its use before it is finalised and
reported.
•20.3. It is a valuer’s responsibility to ensure that the
scope of work has been communicated to all parties to
a valuation assignment prior to completion of the
assignment, including:
 101- S 20 Continued
(a) Identity of the valuer:
(b) Identity of the client(s) (if any):
(c) Identity of other intended users (if any):
(d) Asset(s) being valued: The subject asset in the
valuation assignment must be clearly identified. For
example, the subject asset may be:
1. An asset 2. A liability 3. A group of assets and/or liabilities
4. An ownership interest in any of the above
5. A right to use any of the above
6. An asset that is utilised in conjunction with other assets. In
such cases, it will be necessary to further clarify whether those
assets are included in the valuation assignment, excluded but
assumed to be available or excluded and assumed not to be
available.
 101- S 20 Continued
(e)The valuation currency:
(f) Purpose of the valuation:
(g) Basis/bases of value used (104)
(h) Valuation date:
(i) The nature and extent of the valuer’s work, and any
limitations thereon:
(j) The nature and sources of information upon which the valuer
relies:
(k) Identify any significant assumptions and/or special
assumptions:
(l) The type of report being prepared:
(m) Restrictions on use, distribution and publication of the report:
(n) That the valuation will be prepared in compliance with IVS and that the
valuer will assess the appropriateness of all significant inputs: The
nature of any departures must be explained, See IVS Framework paras
60.1–60.4 related to exceptions and departures.
 Inspection & Verification
Extent of inspection and survey depends on details required
and purpose
Verification : All inspection and measurements shall ensure
appropriate conformity with title deeds, plans etc.
If there are significant variation/inconsistencies report to the RP
and seek clarification/advise
All features which are likely to impact the value of the property
must not be overlooked
Ex : Water bodies, Railway line, burial ground, hazardous
features,
Both positive and negative developments/features must be
recorded in the inspection notes
Wherever required photographs need to be taken
Report should contain all these factors/features
 IVS 102 Investigations and Compliance
Investigation:
Sufficient evidence must be assembled by
inspection, inquiry, computation and analysis to
ensure supporting the conclusions
Information obtained is adequate for the purpse
EX: For Market Approach – Reliable market data
For Income Approach – Reliable rental data
If the limitations on investigations are substantial,
the valuer cannot proceed & valuer shall not say
the report is IVS compliant.
If limitations are within reasonable level, appropriate
justification must be provided.
 Data
Data are vital inputs in any Valuation

Collected Data
Observed Data
Inferred Data

Data used in the Report should be validated

Any anomalies in the Data explain and substantiate your
input

EX :
Sale Instances, Market Rentals
Quantitative measurements
 Evidences
Title Deeds, Land Records, Tax documents
Maps, plans, permits
Land use, Land records, DCR/Building Rules FSI,
setbacks
Other licenses like Factory License, PCB Licenses, any
other permits, licenses

All documentary evidences : Certified True copies only

are admissible. Don't rely on Xerox copies
In case certified true copies could not be obtained, get
confirmation from the RP or any authority before
proceeding
 IVS 104 Bases of Value S10 Introduction
10.1 Bases/Basis/Standards of Value – principles on which the
values are based
…basis dictate the selection of methods, inputs, assumptions and
the ultimate opinion of value
10.2 Wherever warranted basis required by Statutory provisions
are to be adopted
10.3 Recognizes in most cases the common inputs may have to
be used
10.4 Depending on the basis of Value, assumed transactions
could take a number of forms
a. Hypothetical transaction
b. Actual Transaction
c. Entry Transaction
d. Exit Transaction
e. Transaction in a particular hypothetical market with spe ch
 IVS 104 Bases and Premises of Value
Defined Bases :
1. Market Value (S-30)
2. Market Rent (S-40)
3. Equitable Value (S-50)
4. Investment Value/Worth (S-60)
5. Synergistic Value (S-70)
6. Liquidation Value (S-80)
Other Bases of Value
1. Fair Value (IFRS – S-90)
2. Fair Market Value (OECD – S-100)
3. Fair Market Value (USIRS – S-120)
4. Fair Value ( Legal/Statutory) – S-120

Valuers must choose the relevant basis/bases of value according to the scope.
Understand that in Valuation we go beyond these bases into what is called
Premise of Value (assumed
 IVS 104 Premise of Value
Premise of Value or Assumed Use describes the circumstances
of how an asset is used. Different bases of Value may require
a particular Premise of Value or allow the consideration of
multiple premises of Value
Ex:
HABU
Current Use
Orderly Liquidation
Forced Sale

We have reason to believe that the Value can be more

appropriately concluded based on the presumption that it can
be put to be put a particular or alternate use, then that reason
to believe becomes the premise of value. Or particular
circumstance like forced sale
 IVS 104 Bases and Premises of Value
Defined Bases : 6
Other Bases of Value : 3
Premises of Value :4

Total to choose from : 13

Valuer must choose the appropriate base or premise of Value

before embarking on Valuation. This should be clearly
discussed in the Scope of work with the stake holders based
on the purpose/intended use of the Report
 Valuation for IP
• Two Values ( Bases) are required by IP in a
resolution process
1. Fair Value
2. Liquidation Value

Fair Value is required for take over of the company

Liquidation is in case the company is proposed to be
liquidated by the decision COC and approval by
NCLT
Valuer should give two values as above normally
Normally two Valuers are required to give values
IP will propose action based on these values.
 Fair Value as per Ind As & IFRS
1. Definition of fair value 9 This Ind AS defines fair
value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date.
2. In IFRS 13, fair value is defined as “the price that
would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market
participants at the measurement date.”4 Accordingly,
this price is an exit price.
 IVS 104 Forced Sale Value - Premise

In the IBC context :

Sales in an inactive or falling market are not automatically “forced

sale”
Unless the seller is compelled to sell by a deadline that prevents
proper marketing, the seller will be willing seller within the
definition of Market Value (S-30.1-30.7)
 Liquidation Value (S 80 of IVS 105)
The amount that would be realised when an asset
or a group of asset sold on a piecemeal basis.
Costs of getting the assets into saleable condition
Immovable Property :
•Statutory dues
•Updating of Revenue records
•Curable depreciation (if not already accounted in the Valuation)
Liquidation Value may be determined under two
different premises of Value
a. Orderly Liquidation (Section 160 of IVS 105)
b. Forced Liquidation ( Section 170 of IVS 105)
Valuer must disclose which premise of value is assumed
 Orderly Liquidation Value (S 160 of IVS 105)
Premise of Value : Orderly Liquidation
160.1 : An Orderly Liquidation describes the value of a
group of assets that could be realised in a liquidation
sale, given a reasonable period of time to find a
purchaser(or purchasers), with the seller being
compelled to sell on an “as-is-where-is” basis

160.2 The reasonable period of time to find a purchaser

(or purchasers) may vary by asset type and market
conditions

Note : ‘asset’ is defined in glossary

 Forced Liquidation Value (S 170 of IVS 105) P25
Premise of Value : Forced Sale
The price that could be obtained in circumstances
where a seller is under compulsion to sell and that, a
proper marketing period is not possible and buyers may
not be able to undertake due diligence.

The price then depend on the ‘pressure’ on the seller

It may also reflect the consequences for the seller
failing to sell within the period available
 Forced Liquidation Value (S 170 of IVS 105) P25
Important points for Forced Liquidation Value contd..:
Clearly identify the reasons for the constraint on the
seller, including consequences of failing to sell in the
specified period by setting out appropriate
assumptions.

IF THESE CIRCUMSTANCES DO NOT EXIST AT THE

VALUATION DATE, THESE MUST BE CLEARLY
IDENTIFIED AS SPECIAL ASSUMPTIONS.
 IVS 105 Valuation Approaches & Methods
Three Approaches based on Principles of Price Equilibrium,
Anticipation & Substitution
1. Market
2. Income
3. Cost
There are different methods under different approaches
Valuer has to select the most appropriate approach under the
circumstances. Selection criteria:
Appropriate bases & Premise of Value based on purpose.
Respective strengths & weakness
Nature of asset
Approaches & Methods used by market participants
Availability of reliable information
 IVS 105 Valuation Approaches & Methods
Not required to use more than one method – confidence about the
reliability & accuracy

Should consider using multiple approaches & methods and may

be used if observable inputs are insufficient in one method to
arrive at a reliable conclusion

But reconcile to a single conclusion without averaging.

Valuer has to judiciously choose & substantiate

If the values are widely divergent, valuer should understand the

reasons.
Generally weighting is not recommended. It is preferably to
choose the one which is a better indication of Value
 IVS 105 Valuation Approaches & Methods
Valuers should use the inputs available in all the 3 approaches.
Then analyse to come to a conclusion

NO one approach is applicable in all situations. Price information

from the market is generally considered a strong evidence

Subjective weightings on market input may lead to an appropriate

conclusion
 IVS 400 Real Property Interests

Principles contained in general Standards apply

Additionally for Real Property Interests the following apply

Real Property is a right of ownership with a bundle of rights. 3

types of interests:
Superior right : Land ownership : Possession & control. Legally
enforceable constraints are relevant.
Subordinate Interest : Right to possession & control for a specified
period : Lease
Right without possession : Right to Pass over the land or use it for
a specific activity
 IVS 400 Real Property Interests

Rely upon 101 & 102

Evidence for property interest

Extent of inspection required
Responsibility on extent
Responsibility on condition of building
Responsibility on services
Responsibility on foundation
Responsibility for identification of potential environmental risks
Building/development permits and their validity/potential changes
in DCR/Building rules
 Confidentiality
18. A valuer should not use or divulge to other clients
or any other party any confidential information about
the subject company, which has come to his/its
knowledge without proper and specific authority or
unless there is a legal or professional right or duty to
disclose.
 Information Management
19. A valuer should ensure that he/ it maintains written
contemporaneous records for any decision taken, the
reasons for taking the decision, and the information
and evidence in support of such decision. This should
be maintained so as to sufficiently enable a reasonable
person to take a view on the appropriateness of his/its
decisions and actions.
20. A valuer should appear, co-operate and be
available for inspections and investigations carried out
by the Registration Authority, any person authorised by
the Registration Authority, the Valuation Professional
Organisation with which he/it is registered or any other
statutory regulatory body.
 Information Management
21. A valuer should provide all information and records
as may be required by the Registration Authority, the
Tribunal, Appellate Tribunal, the Valuation Professional
Organisation with which he/it is registered, or any other
statutory regulatory body.
22. A valuer while respecting the confidentiality of
information acquired during the course of performing
professional services, should maintain proper working
papers for a period of three years, for production
before a regulatory authority or for a peer review. In the
event of a pending case before the Tribunal or
Appellate Tribunal, the record should be maintained till
the disposal of the case.
 Statutes/laws to be known
The Companies Act 2013
The Companies Rules
The Companies (Registered Valuers & Valuation)
Rules 2017
Insolvency & Bankruptcy Code 2016
 Future.....
•Now the reporting will me more true & fair
as far as for the financial statement are
concerned
• The stakeholder may rely on it more
vigilantly today as compared to that of prior
year.
•Increased punishment means increased
responsibility!
•An eye-opener for all professionals
Valuer’s Experience is still the key to
Valuation

Thank you