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Valuation of Land & Buildings David Baulch Valuer-General’s Valuations Valuations carried out on a seven year cycle Three Values: Land Value Capital Value Assessed Annual Value Defintions Land Value The capital value of land assuming that no improvements have been made. Capital Value

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valuer general s valuations
Valuer-General’s Valuations
  • Valuations carried out on a seven year cycle
  • Three Values:
    • Land Value
    • Capital Value
    • Assessed Annual Value
defintions
Defintions
  • Land Value
    • The capital value of land assuming that no improvements have been made.
  • Capital Value
    • The capital sum realisable from sale of land including all improvements
  • Assessed Annual Value
    • Gross annual income from rental after allowing for GST, rates and land tax.
land tax adjustment factors
Land Tax Adjustment Factors
  • Land indexed annually for Land Tax purposes only.
  • Indices are municipal averages
  • Separate indices for commercial, industrial, residential and rural land
  • Factors are not applicable for improvements
adjustment factors for 2004 05
Adjustment Factors for 2004-05
  • Residential – range 1.00 to 2.00
  • Commercial – range 0.85 to 1.50
  • Industrial – range 0.85 to 1.50
  • Rural – range 1.00 to 1.50
  • Acceptable to TAO for land values only
cpi index movements
CPI index movements
  • In the last four years
  • CPI has moved 11.8%
  • Construction industry 15.4%
buildings
Buildings
  • V-G valuation will not represent fair value after three or four years
  • Other options
    • Independent valuation between V-G’s valuation
    • Apply a suitable index to current replacement cost and restate depreciation
    • Consider materiality?
materiality issues
Materiality issues
  • Given the scale of infrastructure assets, roads, bridges, sewer and water assets, building values are unlikely to be material in the statement of financial position
  • Likewise resultant depreciation of buildings is unlikely to be material in the statement of financial performance
what of the future
What of the Future?
  • V-G to move to a six year cycle with updates every two years
  • Will apply to all three valuations that are carried out
  • Expected to start in about two years time
  • Does not solve today’s problems
audit implications
Audit Implications
  • While uncorrected “errors” from a failure to update valuations may not be material in the financial statements, they will reduce the level of tolerance for any other uncorrected errors.
  • You may be called upon to establish that there is no material mis-statement