The International Valuation Standards Council (IVSC) has announced it is to issue guidance on how to measure the value of investment property under construction. London-based IVSC is to issue a discussion document with a draft guidance in the second quarter of 2009. To bridge the gap in the meantime the council has issued an Interim Position Statement, which it says summarises major valuation issues and provides its preliminary view of the valuation principles that should be adopted.
The International Valuation Standards Council (IVSC) has announced it is to issue guidance on how to measure the value of investment property under construction. London-based IVSC is to issue a discussion document with a draft guidance in the second quarter of 2009. To bridge the gap in the meantime the council has issued an Interim Position Statement, which it says summarises major valuation issues and provides its preliminary view of the valuation principles that should be adopted.
The decision to draw up the guidance follows a change made by the International Accounting Standards Board (IASB), which brought investment property under construction into the scope of IAS 40 Investment Property from 1 January 2009.
The changes to IAS 40 mean that any entities who measure their completed investment property at fair value will also need to measure any investment property that is under construction on the date of the financial statement at fair value, subject only to the value being reliably determinable.
Even if an entity measured its investment property using the cost model (the other measurement option available in IAS 40) it would still need to provide a fair value estimate of the partially completed property, since IAS 40 requires the disclosure of the fair value of investment property when the cost model for accounting is applied.
Chris Thorne, chairman of the International Valuation Standards Board, commented: 'Although sites for the construction of investment property and completed investment property are routinely valued for many reasons, until this change in the accounting standards the requirement to value a partially completed project was something that was rarely encountered.
'Soon after the IASB announcement, the European Public Real Estate Association (EPRA) approached IVSC with evidence of different approaches being developed to respond to this new requirement by listed property companies and their advisors. Following discussions with EPRA, the IVSB agreed that it should commence a project to produce guidance aimed at promoting consistency.'
The International Assets Valuation Standards Committee (TIAVSC) was founded in 1981 following discussions between representatives of the UK and US valuation profession. The committee changed its name to the International Valuation Standards Committee in 2004.
The IVSC Interim Position Statement is available via the website www.ivsc.org or click on the link below
