ASA AM flashcards
ASA AM · Build recall with a focused review session.
33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- USPAP Standard 3
- Governs the development of an appraisal review opinion, including scope of work, data analysis, and the reviewer's own value conclusion if one is developed.
- USPAP Standard 4
- Governs the reporting of an appraisal review, requiring the reviewer to state scope, sources, and the basis for the review opinion.
- Administrative review
- A review limited to checking a report for compliance with reporting requirements, completeness, and internal consistency, without re-analyzing the value conclusion.
- Technical review
- A review that scrutinizes the appraiser's methodology, data sources, and analysis for appropriateness and correctness, often resulting in a reviewer's own value opinion.
- AMC record retention
- Appraisal management companies must retain assignment records, appraiser credentials, and communications for the applicable USPAP period, generally five years.
- Reviewer independence
- The reviewer must have no fee contingent on the review outcome and must disclose any prior involvement with the property or the original appraiser.
- Capitalization of earnings
- Value = normalized earnings divided by the capitalization rate, where the cap rate equals the discount rate minus the long-term growth rate.
- Discounted cash flow
- Present value equals the sum of projected cash flows discounted at the required rate of return, plus the discounted terminal value.
- DLOM
- Discount for lack of marketability, applied to closely held interests to reflect the difficulty and cost of converting the interest to cash, often 20–40%.
- DLOC
- Discount for lack of control, applied to minority interests to reflect the inability to direct the entity's operations or distributions.
- WACC formula
- Weighted average cost of capital = (E/V) × cost of equity + (D/V) × cost of debt × (1 − tax rate).
- Revenue Ruling 59-60
- IRS guidance listing factors for valuing closely held businesses for federal tax purposes, including earning capacity, goodwill, and comparable sales.
- Enterprise value
- The total value of the operating business, equal to equity value plus debt minus cash and cash equivalents.
- Excess earnings method
- A valuation method that capitalizes earnings above a reasonable return on net tangible assets to derive the value of intangible assets.
- Four Cs of diamonds
- Carat weight, color, clarity, and cut: the four grading factors that drive diamond value and market pricing.
- Diamond clarity scale
- Grades from FL and IF through VVS1-2, VS1-2, SI1-2, and I1-3, reflecting the number, size, and visibility of inclusions.
- Diamond color scale
- Grades D through Z, from colorless (D–F) through near colorless (G–J), faint (K–M), very light (N–R), and light (S–Z).
- Troy ounce conversion
- One troy ounce equals 31.1035 grams; one pennyweight equals 1.555 grams, used for precious metals valuation.
- Gold karat purity
- Karat expresses gold purity out of 24 parts: 14K is 58.3% gold, 18K is 75%, and 22K is 91.7%.
- Gemological report
- A laboratory document identifying a gemstone's species, treatment status, and grading; it documents characteristics but does not establish value.
- Replacement cost new
- The cost to acquire a new item of equivalent utility as of the valuation date, used as the starting point in the cost approach.
- Reproduction cost
- The cost to recreate an identical item using the same materials and methods, often used for unique or historic machinery.
- Age-life depreciation
- A method computing depreciation as effective age divided by total economic life, expressed as a percentage of replacement cost new.
- Functional obsolescence
- Loss in value from inadequacies or excesses in the asset's design, capacity, or technology relative to current standards; may be curable or incurable.
- Economic obsolescence
- Loss in value caused by external factors such as market conditions, regulations, or reduced demand, applied after physical and functional depreciation.
- Orderly liquidation value
- The value realized in a sale conducted over a reasonable marketing period, with the seller under no compulsion to sell.
- Forced liquidation value
- The value realized in a sale conducted under a short, constrained timeframe, typically with limited exposure to the market.
- Value in use vs exchange
- Value in use assumes the item remains in its current application; value in exchange assumes a sale in the relevant marketplace.
- Breakdown depreciation method
- A method separating physical deterioration, functional obsolescence, and economic obsolescence, each measured and deducted individually from replacement cost.
- Insurance personal property value
- Insurance appraisals typically use replacement cost new without deduction for depreciation, while estate appraisals use fair market value.
- Highest and best use
- The use that is legally permissible, physically possible, financially feasible, and maximally productive, producing the highest property value.
- Net operating income
- Effective gross income minus operating expenses, excluding debt service and income taxes, used in the income capitalization approach.
- Capitalization rate
- The ratio of net operating income to property value, reflecting risk, growth expectations, and required return in the market.