SAEE International Valuation Standards 2 — Questions and Answers
Question 1: Which organization issues the International Valuation Standards (IVS)?
- International Valuation Standards Council (IVSC) (Correct answer)
- International Accounting Standards Board (IASB)
- Royal Institution of Chartered Surveyors (RICS)
- Financial Accounting Standards Board (FASB)
Correct answer: International Valuation Standards Council (IVSC)
The IVSC is the global body responsible for developing and maintaining the International Valuation Standards.
Question 2: Under IVS, what is the primary purpose of identifying the 'basis of value' in an assignment?
- To define the type of value being estimated and its assumptions (Correct answer)
- To set the valuer's professional fee
- To determine the report's publication date
- To select the printing format of the report
Correct answer: To define the type of value being estimated and its assumptions
The basis of value specifies the fundamental measurement premise, such as market value or fair value.
Question 3: Which of the following is the IVS definition focus of 'Market Value'?
- Estimated amount in an arm's-length transaction between willing parties (Correct answer)
- The amount paid by the most aggressive bidder
- The insured replacement cost
- The book value recorded in accounts
Correct answer: Estimated amount in an arm's-length transaction between willing parties
Market value assumes a willing buyer and seller acting knowledgeably and without compulsion.
Question 4: What does the IVS framework require a valuer to do regarding assumptions and special assumptions?
- Clearly state and disclose them in the report (Correct answer)
- Avoid using any assumptions
- Keep them confidential from the client
- Apply them only to tangible assets
Correct answer: Clearly state and disclose them in the report
IVS requires assumptions and special assumptions to be explicitly stated and agreed upon.
Question 5: Which valuation approach estimates value based on comparable transactions in the market?
- Market approach (Correct answer)
- Cost approach
- Income approach
- Residual approach
Correct answer: Market approach
The market approach derives value by comparing the subject asset to similar assets that have transacted.
Question 6: Under IVS, the income approach converts future cash flows into a single value primarily through which technique?
- Discounting or capitalization (Correct answer)
- Indexation to inflation
- Straight-line depreciation
- Replacement cost adjustment
Correct answer: Discounting or capitalization
The income approach uses discounting or capitalization of expected economic benefits.
Question 7: What is the 'scope of work' under IVS intended to establish before a valuation begins?
- The terms, extent, and limitations of the engagement (Correct answer)
- The final value conclusion
- The marketing strategy for the asset
- The tax liability of the owner
Correct answer: The terms, extent, and limitations of the engagement
Scope of work defines what the valuer will do, including purpose, asset, and any restrictions.
SAEE International Valuation Standards 2
Which organization issues the International Valuation Standards (IVS)?