Valuation bodies agree to more convergence

Last week, the International Valuation Standards Council (IVSC) signed a memorandum of understanding (MoU) with 19 regional and national valuation standard setters that commits them to either adopt, or declare that their own standards are in compliance with, IVSC standards within the next three years.

The work is expected to make valuation a less complicated exercise in the time ahead. Private fund managers especially would benefit from a more universal valuation standard due to the illiquid nature of their assets under management, which can be difficult and time-consuming to price.

Some of the notable valuation organizations to have signed the memorandum include the Appraisal Institute of Canada, China Appraisal Society, Australian Property Institute, the UK-based Royal Institution of Chartered Surveyors and the American Society of Appraisers.

Already the IVSC, which sets valuation standards across a wide range of assets, signed a similar agreement with the International Private Equity Valuation (IPEV) board, which provides valuation guidelines for the private equity and venture capital industry. The agreement, signed in 2011, ensures IPEV’s valuation guidelines are consistent with the work of the IVSC, which wants to harmonize valuation practices and disclosures at a global level.

“From a macro perspective, it highlights the move to create more commonality in the valuation profession across all of business, not just private equity and venture capital,” said David Larsen, managing director at financial advisory and investment banking firm Duff & Phelps.

Importantly, a number of emerging market valuation organizations have committed to the IVSC standard. “[This] will help iron out any inconsistencies in areas where standards are less well developed,” said in a statement IVSC chairman Sir David Tweedie. “This is a landmark achievement and represents a major step towards getting global adoption of international valuation standards.”