What is the existing use value basis of valuation and does it remain fit for purpose?
Abstract
This paper debates the application of existing use value (EUV) as a valuation basis for use in financial reporting of UK public sector operational assets and questions whether it remains fit for its original purpose in an International Financial Reporting Standards (IFRS)-dominated reporting environment. The RICS has launched a guidance project in this area in response to stakeholder feedback alluding to inconsistencies in the interpretation of the EUV principles among valuers and auditors. In view of these issues arising, the author questions the continued use of EUV and considers whether it should be abandoned altogether as a valuation basis. He goes on to consider alternative valuation bases for valuing specialised assets in the public sector such as a fair/market value approach, historic cost, and current operational value, currently being developed by the International Public Sector Accounting Standards Board (IPSASB).
The full article is available to subscribers to the journal.
Author's Biography
Jonathan Fothergill is Senior Specialist in Valuation and Investment Advisory working within the Standards Department of the Royal Institution of Chartered Surveyors (RICS). He is a Fellow Member of the RICS, an Associate Member of the Royal Institute of Chartered Arbitrators and an RICS Registered Valuer and Expert Witness. He has over 25 years’ general practice surveying experience, predominantly in the areas of investment brokerage, commercial valuation and development consultancy, gained while working as a director within leading international real estate consultancies in the UK, Central and Eastern Europe and the Middle East. Recent projects undertaken in his current role with RICS include: working with an expert group of accountants and valuers to publish an Insight Paper, ‘IFRS 16 Principles for UK Real Estate Professionals: Accounting for Leases on the Balance Sheet’, along with working with valuation experts and stakeholders to provide guidance to address the misinterpretation of existing use value (EUV) as a basis of valuation in its UK public sector application. He is also a member of the Consultative Advisory Group to the International Public Sector Accounting Standards Board (IPSASB) providing valuation input on their ongoing public sector measurement projects.
Citation
Fothergill, Jonathan (2022, December 1). What is the existing use value basis of valuation and does it remain fit for purpose?. In the Journal of Building Survey, Appraisal & Valuation, Volume 11, Issue 3. https://doi.org/10.69554/RLSL9605.
Publications LLP