RICS Valuation – Professional Standards

1 rics Valuation Professional StandardsIncorporating the International Valuation Standards March 2012 rics Valuation Professional Standards March 2012 rics Valuation Professional Standards (March 2012)This edition of rics Valuation Professional Standards (the Red Book ) updates the Standards to make them fully compliant with the International Valuation Standards (IVS) 2011. To assist users the whole of IVS 2011 is reproduced as an Red Book is issued by the rics Valuation Professional Group as part of its ongoing commitment to promote and support high Standards in Valuation delivery. It is mandatory for rics members undertaking Valuation services, but will also be a useful reference work for Valuation users and other stakeholders.

2 Global and UK edition rics Valuation Professional StandardsIncorporating the International Valuation StandardsMarch 2012 Please note: references to the masculine include, where appropriate, the by the Royal Institution of Chartered Surveyors ( rics )Surveyor CourtWestwood Business ParkCoventry CV4 responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication can be accepted by the authors or by the Valuation Professional Group of the Royal Institution of Chartered 978 1842 19 762 2 Royal Institution of Chartered Surveyors ( rics ) March 2012. Copyright in all or part of this publication rests with rics .

3 No part of this work may be reproduced or used in any form or by any means including graphic, electronic, or mechanical, including photocopying, recording, taping or web distribution, without the written permission of the Royal Institution of Chartered Surveyors or in line with the rules of an existing licence. Printed in Great Britain by Page Bros, NorwichRICS Valuation Professional Standards | iiiMarch 2012 This edition of the Red Book incorporates a number of changes to the existing Standards to make them fully compliant with the new International Valuation Standards (IVS). Published in July 2011 and taking effect from 1 January 2012, the IVS is adopted and, in some instances, supplemented by the rics Standards .

4 To assist users, the whole of the IVS 2011 is reproduced in its entirety as an annex in both hard copy and digital versions. A material change in the IVS is the extension of its application beyond property to all types of asset, with the word asset also being deemed to include liability where appropriate. Consequently, some references have been changed in this edition to accord with the IVS usage. However, the rics Standards continue to cover in considerable detail the Valuation of assets in the form of real estate (land, buildings and interests therein), and so the word property has been retained where it is necessary for clarity. Readers should be aware that this edition has been issued as an interim measure to ensure that the existing material complies with the new IVS.

5 A comprehensive review of the Red Book is currently being undertaken and will include, among other developments, new material relating to business Valuation and intangibles. Publication following the review is planned for full details of the changes made to the Standards , together with explanations, are set out in the following madeIntroductionParagraph 1 has been reordered. New text has been added to paragraph 2 to align the rics Standards with the IVS and to explain the effect of the change from property to assets in parts of these Standards . In addition, the paragraph has been revised to reinforce the principle that compliance with these Standards will ensure compliance with the IVS.

6 Paragraph has the addition of the web address of the Red Book section, where the exposure draft is posted along with other Red Book related has been revised to confirm that this edition of the Red Book applies to valuations where the Valuation date is on or after the effective date of this edition. This text change had already been implemented on the web-based | rics Valuation Professional STANDARDSR eferenceChanges made (continued)GlossaryA number of revisions have been made to adopt the IVS 2011 definitions: basis of value now refers to assumptions , not principles ; cost approach is a new definition; the definition of fair value has been revised; income approach is a new definition; goodwill is a new definition; investment property is a new definition; the definition of investment value has been extended; market approach is a new definition; the definition of market rent has been revised.

7 The definition of market value has been revised; real estate and real property are two new definitions; the definition of special assumption has been revised; special purchaser has been revised to refer to a particular buyer ; the definition of synergistic value has been revised; and Valuation date has been included as the preferred reference, while date of Valuation is now only cross referenced to this greater clarity, the exceptions have been numbered. New text has been added to paragraph 5 that draws attention to the need to consider IVS application even if the purpose falls within the extract from the IRRV Code of Conduct has been extended to include the reference to the rics code of practice, Rating consultancy, 3rd edition (2010).

8 VS new paragraph has been inserted to explain how these Standards comply with the new paragraph has been added requiring that notes on resolutions of conflicts of interest must be retained in the working standard has been extended to confirm that it incorporates all the requirements of IVS 101 Scope of Work. The list has been revised to incorporate specific phrases within the IVS, which are: (a) a reference to other intended users ; (e) a replacement of the word property by assets or liabilities ; (i) wording that requires the responsible valuer to be named; (p) a requirement to confirm compliance with IVS where statement has been added that the list of minimum terms includes all the similar terms in IVS Valuation Professional Standards | vReferenceChanges made (continued)VS paragraph 4 the reference to forced sale has been revised to be the same as in IVS 2 refers to the commentary on basis of value in the IVS standard now links directly to the IVS explanation of market rent has been revised and is quoted in This standard now links directly to the IVS standard has been completely rewritten to highlight the different definitions of fair value : that adopted by the IVS.

9 And that adopted by the International Accounting Standards Board (IASB). The standard also now links directly to the IVS 4 This section has been completely rewritten to incorporate references to two IVS applications (financial statements and secured lending). The IVS material has not been reproduced, but the standard indicates its standard has been extended to strengthen the requirement for the valuer to retain adequate notes relating to the standard has been extended to confirm that it incorporates all the requirements of IVS 103 Reporting. The list has been revised to incorporate specific requirements of the IVS, which are: (a) a reference to other intended users ; (e) a replacement of the word property by assets or liabilities ; (i) wording that requires the responsible valuer to be named; (p) a requirement to confirm compliance with the IVS where statement has been added that the list of minimum terms includes all the similar terms in IVS reference to state has been revised to country.

10 Appendix 2 This appendix has been revised to incorporate additional material and rephrasing in IVS 101 as follows: (a) This item has been extended to refer to other intended users . (c) A reference to assets held as a group or portfolio is now included. (f) The revision reinforces the need to identify the correct basis of value when adopting fair | rics Valuation Professional STANDARDSR eferenceChanges made (continued)Appendix 2 (continued) (h) A reference to VS has been added. (i) An important note here confirms that, unlike the IVS, the Red Book does not allow a Valuation to be prepared by a firm. The valuer responsible must always be identified.