The RICS Valuation – Professional Standards (the 'Red Book') as they apply in the UK have been updated with effect from the end of April 2015. Innes England's valuation expert Steve Holland explains how the changes may impact your bottom line.
If you know what half a yard looks like, think in feet, inches and miles per gallon, or even listen to a wireless, you probably think of property in terms of Open Market Value, or OMV. Old money, if you like.
OMV was superceded by MV (Market Value) more than ten years ago but not many in the property profession, never mind anywhere else, will remember the difference. Was there one...?
The rules governing property valuation in the UK are set down in the Royal Institution of Chartered Surveyors’ Valuation Professional Standards, unofficially known as The Red Book. Its latest revision, effective April 2015, incorporates some important changes.
Significantly, and in line with current UK Generally Accepted Accounting Principles (UK GAAP), property valuations for inclusion in financial statements should now adopt Fair Value.
Unhelpfully, there are multiple definitions in use. In short, it is important to establish and agree with the client under which regime the entity is regulated. This can affect whether one is to consider value to specifically identified parties, or hypothetical parties in the market. That can in turn impact on taxation liabilities, and hence profit.
You can read the full summary of the changes on the RICS website here