SAEE SAEE - International Valuation Standards Questions and Answers 3 — Questions and Answers
Question 1: Under IVS, which body is responsible for issuing and maintaining the International Valuation Standards?
- The International Valuation Standards Council (IVSC) (Correct answer)
- The Appraisal Foundation
- The Royal Institution of Chartered Surveyors (RICS)
- The Financial Accounting Standards Board (FASB)
Correct answer: The International Valuation Standards Council (IVSC)
The IVSC is the independent global standard-setter responsible for issuing and maintaining IVS.
Question 2: IVS 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. This definition aligns most closely with which accounting standard?
- IFRS 13 (Correct answer)
- ASC 805
- IAS 16
- ASC 360
Correct answer: IFRS 13
IFRS 13 'Fair Value Measurement' shares the same exit-price definition of fair value as used in IVS.
Question 3: Under IVS 105, which of the following is NOT listed as a principal valuation approach?
- Residual Approach (Correct answer)
- Market Approach
- Income Approach
- Cost Approach
Correct answer: Residual Approach
IVS 105 identifies three principal approaches: Market, Income, and Cost; the Residual Approach is a method within the Income or Cost approach, not a standalone principal approach.
Question 4: According to IVS, 'synergistic value' refers to value that arises from the combination of two or more assets or interests where the combined value exceeds the sum of the individual values. This is also known as:
- Marriage value (Correct answer)
- Investment value
- Liquidation value
- Special value
Correct answer: Marriage value
IVS uses the term 'marriage value' interchangeably with synergistic value to describe incremental value created by combining interests.
Question 5: IVS requires that a valuation report must be clear enough to allow a reader to understand the scope of work. Which IVS standard specifically addresses reporting requirements?
- IVS 103 (Correct answer)
- IVS 101
- IVS 105
- IVS 200
Correct answer: IVS 103
IVS 103 'Reporting' establishes the minimum content requirements for valuation reports.
Question 6: Under IVS, 'equitable value' is defined as the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties. Which type of transaction most typically uses this basis?
- Shareholder disputes and divorce proceedings (Correct answer)
- Forced liquidation sales
- Portfolio bulk disposals
- Insurance replacement cost assessments
Correct answer: Shareholder disputes and divorce proceedings
Equitable value is commonly applied in shareholder disputes, divorce settlements, and other situations requiring a fair outcome between specific identified parties.
Question 7: According to IVS 101, which of the following elements must be established in the 'scope of work' before a valuation is performed?
- The purpose of the valuation, the basis of value, and the valuation date (Correct answer)
- The final value conclusion, comparable sales, and capitalization rate
- The client's preferred value, market conditions, and discount rate
- The intended user's credit rating, asset age, and depreciation method
Correct answer: The purpose of the valuation, the basis of value, and the valuation date
IVS 101 requires the scope of work to establish purpose, basis of value, valuation date, and other key parameters before the assignment begins.
SAEE SAEE - International Valuation Standards Questions and Answers 3
Under IVS, which body is responsible for issuing and maintaining the International Valuation Standards?