Commercial Real Estate Finance

Posts Tagged ‘Jim Andrews IRR’

Today we’re excited to feature our first guest post from our friends at Integra Realty Resources! From their IRR on Real Estate blog, here is IRR Managing Director Jim Andrews to discuss the complex, ever-changing world of real estate valuation. Many thanks to the IRR Blog and Jim Andrews for the contribution!

Why Consistent International Valuation Standards Are Essential

There’s no shortage of valuation standards today, such as the Royal Institution of Chartered Surveyors (RICS) “Red Book,” the Uniform Standards of Professional Appraisal Practice (USPAP), and the International Valuation Standards (IVS), to name a few. Use of these standards varies by country and based on the clients’ needs. But the real property and business valuation community is increasingly boiling down these rules into a more consistent set of standards as the members of these organizations collaborate in defining the guidelines for appraisals.

I spoke about this topic [last November] at the RICS Summit of the Americas on a panel discussion I helped spearhead, titled “Comparison of Valuation Standards and Movement to Globalization.” Joining me were current and former committee members of the organizations that produce the various standards, such as RICS, the Appraisal Foundation, the Appraisal Institute of Canada, and the International Valuation Standards Committee (IVSC).

Everyone on the panel expressed interest in having a more consistent set of standards. We delved into the reasoning more deeply, and I wanted to share it with you.

1. Enhance the reputation of the profession and promote its usefulness around the world. 

Currently, the U.S. uses Generally Accepted Accounting Practices (GAAP) as its set accounting principles. Nearly every other significantly developed country has already adopted the International Financial Reporting Standards (IFRS). The U.S. still hasn’t moved toward total adoption of the IFRS measures, but it has begun integrating IFRS with GAAP. An established set of consistent standards would help in appraising assets and liabilities for financial reporting, especially for companies that control assets in various countries and work across national borders. For valuations for other purposes, the reputation of the profession would be enhanced if the clients could expect consistency in valuation reporting internationally.

2. Simplify the appraisal process.

USPAP is the accepted set of standards for valuation in the U.S. But if a member of RICS is performing the appraisal, it should also comply with RICS standards, which differ in subtle ways. In the Caribbean, I work across U.S. and British territories, which typically require different standards, as well as Dutch, French, and Latin American islands where there are generally no nationally accepted standards. A single set of standards and guidance notes would enable appraisers to produce a credible valuation with a similar report structure regardless of membership or the location of the asset to be valued. Read the rest of this entry »