1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

Philippine Valuation Standards

Mr. Raul PunzalanTechnical Adviser

1st NATIONAL CONGRESS on Property Valuation and Taxation

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

A p p r o a c h t o

Developing the Philippine

Valuation Standards

Objectives

Provide consistency & understanding between providers & users of valuations

Raise the quality of public & private sector valuations & reporting

Promote transparency & reliability of valuations

Reduce financial risk for users of valuations

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

Review of existing national, regional & international Standards

Existing Standards used in the Philippines (private sector)

Uniform Standards of Professional Appraisal Practice (USPAP) International Valuation Standards (IVS)

Royal Institution of Chartered Surveyors (RICS) ‘Red Book’

Aus/NZ Professional Practice

The European Group of Valuers Associations (TEGOVA)

A p p r o a c h t o

Developing the Philippine

Valuation Standards

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

Operational Considerations

Harmonized with the IVS

Presented & vigorously reviewed by TWG & exposed to stakeholders

Final draft endorsed for the DOF Secretary’s approval (Promulgated under DO 37-09 dated 19 October 2009)

Standards to be adopted initially by the local government assessors; NGAs & Private Sector expected to follow

A p p r o a c h t o

Developing the Philippine

Valuation Standards

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

PVS Draft

Philippine Valuation Standards

Technical Review & Exposure

Procedures for the Development of the Philippine Valuation Standards

A Four-Stage Process

Maintenance & Revision

Approval & Implementation

1 2

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1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

What are STANDARDS?

Standards ARE statements of:Recognised principles & conceptsBest practices in valuation services & reportingAccepted definitions

They do NOT:X Describe different valuation techniquesX Prescribe specific methods of valuation for

different purposesX Tell valuers how to value!

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

what consists the STANDARDS?

I. Fundamentals

II. Core Standards

III. Application Standards

IV. Guidance Notes

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I . F u n d a m e n t a l s

1. CONCEPTS FUNDAMENTAL TO GAVP

Provides commentary on legal, economic, & conceptual frameworks

Defines and explains valuation terms & concepts (e.g., Real Estate; Real Property; Personal Property; Asset; Market Value; Price; Cost &Value; Highest & Best Use)

3 market-based valuation approaches: 1) Sales Comparison2) Income Capitalization 3) Cost

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

2. CODE OF CONDUCT

Addresses the ethical & competency requirements of Valuers

Serves the public interest

Ensures that the results of valuations are

reliable, consistent, & unbiased

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I . F u n d a m e n t a l s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

3. PROPERTY TYPES

Real property

Personal property

Businesses

Financial interests

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I . F u n d a m e n t a l s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

1. MARKET VALUE BASIS OF VALUATION

2. BASES OTHER THAN MARKET VALUE

3. VALUATION REPORTING

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I I . C o r e S t a n d a r d s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

1. VALUATION FOR FINANCIAL REPORTING

A direct extract from the International Accounting Standards (IAS) & International Financial Reporting Standards (IFRS)

Defines & categorizes assets (including land & buildings, machinery, etc) for accounting purposes

2. VALUATION FOR SECURED LENDING PURPOSES

Reduces risk through exposure to inaccurate valuations used by the banking sector.

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I I I . V a l u a t i o n A p p l i c a t i o n s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

3. VALUATION OF PUBLIC SECTOR ASSETS FOR

FINANCIAL REPORTING

Explains the requirements for valuing assets owned or controlled by government or quasi-government bodies

Measures public assets at either ‘Historic Cost’(less accounting depreciation) or ‘Fair Value’(i.e., mark-to-market value)

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I I I . V a l u a t i o n A p p l i c a t i o n s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

1. REAL PROPERTY VALUATION

Summarizes the appraisal process & minimum requirements to arrive at a reasonable & realistic valuation 3 approaches to value (Cost, Income, Sales Comparison) Market value, HABU, etc.

2. VALUATION OF LEASE INTERESTS

Explains leasehold interests & the bundle of rights Shows the hierarchy of rights & interests inherent in

the leasehold

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

3. VALUATION OF PLANT, MACHINERY & EQUIPMENT

Common approach to value is by Depreciated Replacement Cost [Replacement Cost New Less Depreciation (RCNLD)]

4. VALUATION OF INTANGIBLE ASSETS

Discusses intellectual property rights, patents, trademark, copyrights, trade secrets, goodwill, franchise, legal life of intangible asset, etc.

Provides the basis for comparison with other types of valuations

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

5. VALUATION OF PERSONAL PROPERTY

Provides guidance on the valuation of personal property (e.g., works of art, antiques, collectibles, furniture, fixtures & fittings, equipment, etc.)

6. BUSINESS VALUATION

Covers the valuation of businesses for the purpose of shareholdings, acquisitions & disposals

Shows the relationship between the property assets as part of a going concern & the overall value of the business

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

7. CONSIDERATION OF HAZARDOUS & TOXIC SUBSTANCES IN VALUATION

Provides guidance for situations where environmental conditions may have an adverse effect on property values

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

8. THE COST APPROACH FOR FINANCIAL REPORTING (DRC)

The basic guidance for DRC valuations: defines physical, functional & external obsolescence

Introduces the concepts of ‘subject to adequate profitability’ & ‘service provision’ (in the case of public buildings)

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

9. DISCOUNTED CASH FLOW (DCF) ANALYSIS FOR MARKET

VALUATIONS & INVESTMENT ANALYSES

Provides the approach in valuing businesses & certain types of investment properties

Emphasizes the level of expertise & specialist’s skill required in undertaking such valuations

10. VALUATION FOR AGRICULTURAL PROPERTIES

Provides guidance on valuation related to crop production

Provides guidance on categorizing non-realty elements & on adopting different valuation approaches for different asset elements

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

11. REVIEWING VALUATIONS

Distinguishes between administrative (compliance), desk, field, technical, & valuation reviews

Explains the purpose of the review as a reference point

12. VALUATION FOR TRADE RELATED PROPERTIES

Relates to valuation of hotels, gas stations, restaurants, etc.

Provides that the DCF is the normal approach adopted for individual valuations of these properties

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

13. MASS APPRAISAL FOR PROPERTY TAXATION

Describes the framework for Ad Valorem Property Taxation, or statistical and economic studies under government administrative programs

Recognizes that valuations undertaken for taxation purposes are carried out in compliance with local laws & regulations.

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

14. VALUATION OF PROPERTIES IN THE EXTRACTIVE

INDUSTRIES

Differentiates between mineral extraction & the petro-chemical industry in accordance with the UN Framework Classification

Provides a general explanation of the industries & terminology used

Differentiates between 4 categories: exploration, resource, development, & production properties & emphasizes the specialist nature of quantifying reserves, etc.

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

15. VALUATION OF HISTORIC PROPERTY

Provides guidance on valuing heritage properties

Justifies the 3 valuation approaches as applicable to the type & use of the property being valued (e.g., functional, income producing, monumental, etc.)

P h i l i p p i n e V a l u a t i o n S t a n d a r d s

I V . G u i d a n c e N o t e s

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

Procedures for the Development of the Philippine Valuation Standards

Approval & Implementation

Approved by DOF

Adopted by local gov’t assessors

For General Valuations

For Real Property Tax Valuations

Exposure to NGAs

Study of a

Single NGA

Accepted by NGAs

Amend Administrative Orders / Rules & Regulations

Draft 4 - Final Draft(Standards After Exposure)

1st NATIONAL

CONGRESS on

Property Valuation

and Taxation

Thank You!