IVSC Launches Consultation on Revised IVSs d Consulation on
The International Valuation Standards Council has issued a consultation draft of proposed changes to the current standards. Comments are invited before 28 July 2023.
Members of organisations that have formally adopted or recognised the IVS need to pay particular attention to the changes as they could potentially result in changes to the way in which they conduct and present valuations in the near future. Even where the standards are not formally adopted or mandated, the IVSs represent internationally agreed norms of good valuation practice and therefore potentially influence many valuations. It is therefore important that valuers and those who rely on valuations engage with this consultation.
The “General Standards” contain principles which the IVSC deem are applicable to the valuation of any type of assets. There are currently five General Standards, IVS 101 – IVS 105. It is proposed to retire one of these, IVS 102 Investigations and Compliance, and bring in three new General Standards. The current IVS Framework becomes IVS 100 and there are two new standards proposed, IVS 104 Data and Inputs and IVS 105 Valuation Models.
Another change is to move much of the explanatory detail from the main body of each standard into Appendices, with the aim of making the key principles easier to identify and follow.
Valuology will be responding to the consultation. As we study the detail, we will post our comments on each revised standard on this site but based on a preliminary overview we have identified a couple of strategic issues that we believe need to be addressed;
The Foreword states that the standards “apply to everyone in the valuation process for all assets and liabilities no matter where they exist around the world.” The IVSC needs to recognise that it is a creator of standards only. A large part of its authority comes from it being independent of those organisations that do have the responsibility for regulating valuers or valuation. While it can determine what has to be done in order to claim compliance with the IVS, it should avoid language that implies that it determines when and by whom the standards have to be applied. That is a matter for those who decide to adopt the standards.
It was explained in the webinars IVSC held in early May that one of the objectives was to better distinguish mandatory principles from matters that should be considered but do not mandate a specific action applicable in every situation. This has to be welcomed. However, these good intentions are compromised by the definition of “should” used in the standards. Most English language dictionaries clearly distinguish “must” and “should” with the latter used to indicate an action that is normally proper, reasonable or the best thing to do. In contrast, the IVSC have redefined “should” in the Glossary as an action or procedure that is “presumptively mandatory”. They go on to state that the valuer must take the action stipulated unless they can demonstrate a good reason why they should not. Making a clear distinction between mandatory actions and actions that have to be determined after proper consideration of the facts and circumstances is essential when drafting any standard or regulation. It is especially so when dealing with such a wide subject as valuation. We will be strongly arguing that IVSC need to revisit this definition to reinforce the distinction between actions which are always required and those where the appropriate action will usually be that indicated but in some circumstances an alternative may be more appropriate.