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EUROPEAN VALUATION APPLICATION - 1 VALUATION FOR THE PURPOSE OF FINANCIAL REPORTING. Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC The EU has since introduced most of the International Accounting standards/International Financial Reporting
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The EU has since introduced most of the International
Accounting standards/International Financial Reporting
Standards through Commission Regulation (EC) No.1725|2003
of 29 September 2003 adopting certain international accounting standards in accordance with Regulation (EC) 1606|2002
The IAS/IFRS applicable to property-related assets are:Introduction
April 2001 set out the concept underlying the preparation of financial statements
statement into one of five categories
owner-occupied for the purpose of the business, whether specialised
investment for the purpose of generating income or capital gain;
surplus to the requirements of the business;
trading stock, designated as current asset; and
Property, plant and equipment
Property surplus to operational requirements
LeasesClassification of Assets
two models for the recognition of property asset in
the balance sheet:
- The Cost Model
- The Fair Value Model
IAS 16 - Property, plant and equipment
IAS 17 – Leases
IAS - 40 investment propertyTHE SELECTION OF CONSISTENT BASIS OF VALUATION
- “The fair value of land and building is usually determined from market based evidence by appraisal that is normally undertaken by professionally qualified valuers.” (IAS 16 par. 32)
- “If there is no market based evidence for Fair Value because
of the specialised nature of the items of property … and the items is
rarely sold, except as part of a continuing business, an entity may need to estimate fair value using an income or a replacement cost approach.” (IAS 16, par 33)
New Fair Value Measurement GuidanceFair Value
be made for depreciation
or others loss of value of a fixed asset whether from used, passage of
time or obsolescence arising from technological or market changes.
by one of the following procedures:
- Deducting from the cost or valuation of the asset the value of the land
- Making an assessment of the net current replacement cost of the buildings to reflect the value of the asset to the business at the date of valuation.