Professional Practice and Valuation Standards
Professional Practice and Valuation Standards
Domain 1 tests whether you can run an engagement end to end under IVSL practice and the Sri Lanka Valuation Standards (SLVS), which follow the IVSC International Valuation Standards.
Core rules
- Agree written terms of engagement before inspection: client, purpose, asset, basis of value, valuation date, scope of inspection, assumptions, fee and liability.
- Name the basis of value. Market value is the default for mortgage, financial reporting and acquisition work; investment value, fair value and forced sale value mean different things and each must be defined in the report.
- The valuation date is the date the opinion applies to; the report date is when you sign it. Never conflate the two.
- Apply the market (comparable), income and cost approaches, reconcile at least two where evidence allows, and disclose the weighting.
- The report must identify the valuer and competence, state independence and currency, describe the extent of investigation, the method, key inputs, the conclusion and the limiting conditions.
Worked example
A Kandy retail shop earns gross rent of LKR 1,200,000 a year; outgoings are LKR 300,000, leaving net operating income of LKR 900,000. Capitalised at 9% from local shop sales: 900,000 ÷ 0.09 = LKR 10,000,000. A comparable sale at LKR 250,000 per perch on a 40-perch lot gives LKR 10,000,000. The approaches agree, so the opinion is LKR 10,000,000 market value, with lease terms and cap-rate evidence disclosed.
Traps
- Accepting an instruction to "value at X" - conclusions must flow from evidence.
- Reporting a figure with no stated basis of value or valuation date.
- Treating asking prices as comparables without adjustment.
- Assumptions so broad they hollow out the opinion.