The board of valuers, appraisers and estate agents Malaysia
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Valuation Standards

1.0 MVS 2006
   
  The new Malaysian Valuation Standards comes with seventeen standards and two introductory chapters. The introductory chapter commences with definitions of terms and words used in the standards. This is to ensure that the terms are used correctly so as to minimise ambiguity.
The second introductory chapter is on general concepts and principles normally used in the valuation profession. Concepts are explained so that the valuer and other users of the standards are clear about the concepts and principles that are being used. Some of the concepts discussed are "Real Estate”, “Real Property”, “Price”, “Cost” , ”Highest and Best Use", "Utility" and “Market Value”. Certain of these concepts and principles are partly extracted from the International Valuation Standards.
   
 

1.1

The Valuation Standard One relates to the use of market value as a basis of valuation. The definition for this term is now acceptable in all countries that are members of the International Valuation Standards Committee. The definition which is adopted from  the International Valuation Standard, is as follows:

   
  • 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 arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
  • This standard requires the use of market value as basis of valuation for all purposes unless specifically instructed to do otherwise.
 

1.2

The Valuation Standard Two addresses the circumstances when market value is not used as a basis of valuation. The standard required here is for the valuer to state the purpose and explain the basis used in the valuation distinguishing this valuation from market value. Besides that the standard also explains some of the more common bases of valuation other than market value. Some of these bases are Value in Use, Investment Worth, Insurable Value, Special Value and Forced Sale Value.

 

1.3

The Valuation Standard Three outlines the standards expected when preparing valuation reports for financial reporting. Areas covered involved the understanding of the requirements of the Malaysian Accounting Standards and that of the Securities Commission and Bursa Malaysia (formerly Kuala Lumpur Stock Exchange) when valuing properties. Fair value when determined is similar to market value.

 

1.4

The Valuation Standard Four sets out the standards required when valuing properties as collaterals for lending to financial institutions. When valuing for project lending, Valuers are encouraged to incorporate recommendations that lending institutions should carry our feasibility studies prior to approval.

 

1.5

The Valuation Standard Five deals with the standards of a valuer and his qualifications. The standards require that a valuer must possess the necessary qualification and possess the necessary experience, competency and expertise in the area of work that he has undertaken to perform. The circumstances under which an independent valuer operate are also outlined.

 

1.6

Valuation Standard Six discusses the condition of engaging a valuer. Amongst the requirements are the purpose of the valuation and intended use of the valuation, the date of the valuation, the interest, basis of valuation, assumptions to be made, the fees payable and the limits or exclusion of liability to other parties.

 

1.7

Valuation Standard Seven discusses the various purposes of valuation and the basis of valuation for each purpose. The common purposes are for lending, fire insurance, financial reporting, sale and purchase, submission to the Security Commission purposes and for compulsory acquisition.

 

1.8

Valuation Standard Eight deliberates the standards required for a proper inspection and referencing of property and neighbourhood.  It also encompasses the management of data for a valuation can be done.

 

1.9

Valuation Standard Nine lays down the standards required in a valuation report. Valuation report must contain adequate information to allow those who need and rely upon the report to fully understand the data, rationale, analyses and conclusions. It must also state any assumptions and limiting conditions upon which the valuation is based.

 

1.10

Valuation Standard Ten sets out the standards for preparing revaluation reports of an interest in property which are essentially carried out in situations where a previous valuation has been done by the same firm within a period of 5 years.

 

1.11

Valuation Standard Eleven explains the standards pertaining to certain limited cases where a detailed report may not be essential in communicating an opinion of value to the client.  Such instances include situations where a previous valuation has been done by the Firm and a financial institution which has loaned funds on the collateral security of the property now requires an update of the value for the sole purpose of assessing the adequacy or otherwise of the collateral security. 

 

1.12

Valuation Standard Twelve deliberates on  the various methods of valuation that are used by valuers amongst which are the Comparative Method, Investment Method, Residual Method, Cost Method and the Profits Method

 

1.13

Valuation Standard Thirteen considers the use of assumption in valuations. All such assumptions must be clearly spelt out in bold and capital letters in the Terms of Reference, Opinion of Value, and Other Appropriate Sections of the report. In almost all cases a "as is" valuation must also be made. The report should note the inappropriateness of the valuation being used for financing facilities unless appropriate professional advice has been sought.

 

1.14

Valuation Standard Fourteen spells out the standards for the valuation of plant and machinery. In most instances the basis of valuation is market value. Items to be valued must be properly inventoried, inspected and adequately described.

 

1.15

Valuation Standard Fifteen states that all standards issued by the Securities Commission must be strictly adhered to.

 

1.16

Valuation Standard Sixteen sets out that “Guidelines on Asset Valuations” issued by the Director General Of Insurance, Central Bank must be strictly adhered to.

 

1.17

Valuation Standard Seventeen sets out the standard limiting conditions under which the report is prepared. Any other limiting conditions must be agreed with he client and spelt out in the report.

 

 

 

 

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