Jumat, 21 Juni 2013

A basis of value and valuation


A basis of value is a statement of the fundamental measurement assumptions of a valuation. It describes the fundamental assumptions on which the reported value will be based, eg the nature of the hypothetical transaction, the relationship and motivation of the parties and the extent to which the asset is exposed to the market. The appropriate basis will vary depending on the purpose of the valuation. 
 
A basis of value should be clearly distinguished from:
(a) the approach or method used to provide an indication of value,
(b) the type of asset being valued,
(c) the actual or assumed state of an asset at the point of valuation,
(d) any additional assumptions or
special assumptions that modify the fundamental assumptions in specific circumstances.
 
A basis of valuation can fall into one of three principal categories:
(a) The first is to indicate the most probable price that would be achieved in a hypothetical exchange in a free and open market. Market value as defined in these standards falls into this category.
 
(b) The second is to indicate the benefits that a person or an entity enjoys from ownership of an asset. The value is specific to that person or entity, and may have no relevance to market participants in general. Investment value and special value as defined in these standards fall into this category.
 
(c) The third is to indicate the price that would be reasonably agreed between two specific parties for the exchange of an asset. Although the parties may be unconnected and negotiating at arm’s length, the asset is not necessarily exposed in the market and the price agreed may be one that reflects the specific advantages or disadvantages of ownership to the parties involved rather than the market at large. Fair value asdefined in these standards falls into this category.

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