IVSL Valuer Exam cheat sheet

International Valuation Standards (IVS) are issued by the International Valuation Standards Council; IVS 101 sets scope of work, IVS 102 investigation and compliance, IVS 103 reporting, and IVS 104 covers bases of value.

Five bases of value under IVS 104: market value, market rent, equitable value, investment value, and synergistic value; liquidation value and going-concern value are commonly treated as additional bases.

IVS definition of market value requires: willing buyer and willing seller, both acting knowledgeably and prudently, without compulsion, after proper marketing, price agreed at arm's length, and no set-off or special concession.

Highest and best use is the use that is physically possible, legally permissible, financially feasible, and produces the highest value; it is tested before applying the market approach.

Scope of work must state the identity of the valuer and client, intended use and users, asset identified, basis of value, valuation date, extent of investigation, and any significant assumptions or limiting conditions.

Valuation date is the date on which the opinion of value applies; report date is when the report is issued - the two must be distinguished and both disclosed.

Three principal approaches: market (comparable transactions), income (capitalisation or discounted cash flow), and cost (depreciated replacement cost); the valuer must apply the approach appropriate to the asset and data.

A valuation report must be clear, transparent and sufficient for the intended user to understand the valuation, the assumptions, and any material uncertainty; the valuer must retain working papers supporting the opinion.

Core ethical duties: integrity, objectivity, competence, confidentiality, professional behaviour and compliance with technical standards; independence underpins objectivity.

A valuer must decline or withdraw from an engagement where a conflict of interest cannot be managed or disclosed and consented to by all affected parties.

Contingent fees tied to the outcome (e.g., a percentage of the achieved value or loan amount) are incompatible with an independent valuation opinion and should be refused.

Valuers must not accept an engagement outside their competence or experience without disclosing the limitation and, where appropriate, engaging a specialist.

Confidentiality extends to client data and the report; disclosure is permitted only with consent, where required by law or court order, or where required by a professional body.

Marketing, advertising and public statements must be truthful and not misleading; valuers must not claim professional designations or affiliations they do not hold.

Fees and engagement terms should be agreed in writing before work begins, and the valuer should not act for two parties in the same transaction without full written disclosure.

Depreciated replacement cost = current cost of replacement (or reproduction) of the improvements, less physical deterioration, functional obsolescence and economic obsolescence, plus the value of the land.

Income capitalisation: value = net operating income / capitalisation rate; the capitalisation rate is derived from market comparables or built up from a risk-free rate plus risk premium.

Direct capitalisation uses one year's stabilised income; discounted cash flow discounts each period's net cash flow at a market-derived discount rate and adds the present value of the reversion.

Gross rent multiplier (GRM) = sale price / gross annual rent; value = subject gross rent × market GRM - a quick market-approach check for residential and small commercial property.

Replacement cost builds a modern equivalent asset; reproduction cost rebuilds an identical asset - choose replacement cost where the asset's function, not its form, drives value.

For leasehold interests, the valuer must reflect the lease terms: passing rent versus market rent, rent review provisions, unexpired term, renewal rights and any premium or reverse premium.

Adjustment grid for comparables: adjust the comparable's price toward the subject for time, location, size, condition, tenure and transaction circumstances; adjustments are made to the comparable, not the subject.

Physical deterioration uses effective age and total economic life: depreciation percentage = effective age / total economic life; obsolescence is measured separately and deducted.

The Institution of Valuers of Sri Lanka (IVSL) is the professional body for valuers in Sri Lanka; membership grades and the code of ethics are governed by its constitution and by-laws.

The Valuation Department of Sri Lanka is the government department responsible for statutory valuations, including acquisitions and government rating work; it operates under the Ministry of Finance.

The Land Acquisition Act governs compulsory acquisition and requires compensation based on the market value of the land at the date of acquisition, with statutory allowances for injurious affection and severance.

The Title Registration Act and the Registration of Documents Ordinance govern land title and registration; a valuer must verify title, extent and encumbrances before relying on a property as security.

The Condominium Property Act recognises strata/condominium titles and apportionment of common property, which affects the valuation of apartment units and common elements.

The Urban Development Authority Act and municipal council ordinances impose zoning, building and rating controls that constrain permitted use and therefore highest and best use.

Foreign ownership and land transfer restrictions, plus exchange control rules, affect marketability and the pool of purchasers for certain Sri Lankan properties and must be reflected in the valuation.

A valuer giving evidence before courts, tribunals or statutory bodies owes a duty to the tribunal, must be independent of the parties, and must state the facts and assumptions on which the opinion rests.