Valuation for Financial Reporting

The Corporations Act 2001 (or other legislation) directs

Fair Value as the Basis for Asset Valuations

Fair Value is a basis of value specified by various Australian Accounting Standards (AASs). Under AASs certain assets and liabilities are required to or may be measured at Fair Value. Fair Value is defined in AASB 13 Fair Value Measurement (and IFRS 13 Fair Value Measurement) – this Standard sets out how to measure fair value.

Fair Value is defined as "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

Fair Value as defined in the above referenced accounting standards will generally be consistent with Market Value as defined by the IVSC. The objective of a fair value is to estimate the selling price of the subject asset or assets that could be reasonably expected under orderly and current market conditions as at the effective date of valuation. It is important to note that Fair Value for financial reporting is not the same as fair value as used by Valuers in many other situations.

Valuers may be engaged to assist entities in measuring assets and/or liabilities in accordance with Australian Accounting Standards. Valuers may be able to assist in providing details about the valuation process, inputs, etc. that need to be disclosed.

Market Value (IVSC definition) is "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."