IVSC eNews

November/December 2018

Dates for your diary
HSBC’s Gavin Francis named Chair of new IVSC Financial Instruments Board
Real estate market transparency in Nigeria the top priority for new IVSC member organisation, ESVARBON
New business valuation journal launched
New and proposed members
Update from standards boards
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Dates for your diary:

Find out more about the major valuation events and conferences taking place around the world and register by clicking the links.

22-23 November: EACVA's 12th Annual Business Valuation Conference, Dusseldorf
11 December: RICS Commercial Property Conference 2018 London, UK
20-12 February: Hypzert Annual Convention 2019, Dresden, Germany
26 March: RICS Valuation Conference 2019, London

Does your organisation have a valuation event coming up? To list it here please email details to contact@ivsc.org

Gavin Francis, Group Chief Accounting Officer HSBC, has been appointed Chair of a new board tasked with advancing global standards for the valuation of financial instruments. The Financial Instruments Valuation Standards Board brings together valuation leaders from across the financial world, including representatives of international banks, prudential regulators, valuation and accounting firms, to develop common protocols which will underpin valuation in this burgeoning and international asset class.

Gavin Francis is current Chief Accounting Officer at HSBC and a former Director with IASB. Gavin is familiar with the task of standards setting having spent a number of years as Director for Capital Markets at the International Accounting Standards Board (IASB) and, more recently, as Vice Chair of the International Financial Reporting Standards (IFRS) Advisory Council since 2015, a position through which he represented the Institute for International Finance.

Thomas Lee, a Partner with KPMG (Canada) and national leader for financial instrument valuation, has been appointed Vice Chair of the newly created board. He has 17 years’ experience with KPMG working with major financial institutions and corporations in Canada and internationally. Prior to leading KPMG’s FI valuation service, he spent a number of years practicing business valuation and holds the designation of Chartered Business Valuator (CBV) through the Canadian Institute of Chartered Business Valuators (CICBV).

The Board will begin work to develop international standards for FI valuation from January 2019, and this will build on the issues defined and recommendations made by the different working groups already in progress. As their work progresses, updates will be published on the IVSC website, including details of public consultations. The Board will also work closely with the IVSC’s Tangible Assets Valuation Standards Board and Business Valuation Standards Board on issues which cut across all asset classes, in an effort to enhance the global valuation profession.

The Board is comprised of the following members:

Raj Brar, Head of Division, Bank of England Prudential Regulatory Authority
Gavin Francis, Chief Accounting Officer, HSBC (Chair)
Daniel Khan, Principal, Economic Advisory and Complex Securities, EY
Toshiyuki Kitano, Partner, KPMG
Thomas Lee, Partner, KPMG (Vice Chair)
Cindy Ma, Managing Director, Houlihan Lokey
Krishna Nadella, Head of Content and Regulation Sales, Bloomberg
Fernanda Diaz Rodriguez, Academic, Derivatives and Banking
Ben Ryan, Head of Global Valuations Group, Bank of America
Doug Summa, Partner, PwC
CK Zheng, Global Head of Valuations, Credit Suisse

In tandem with the creation of the new FI board, a number of financial instruments experts will also join the IVSC’s Standards Review Board (SRB). The SRB is responsible for coordinating and ensuring alignment across all three of the IVSC’s technical standards’ boards. The new members of the SRB are:

Gavin Francis, Chief Accounting Officer, HSBC (Chair)
Colin Martin, Partner, KPMG
Susan DuRoss, Chief Markets Officer, Harvest Investments
David Larsen, Managing Director, Duff and Phelps

This month, Nigeria’s statutory body for real estate valuation professionals, ESVARBON, joins the IVSC as an institutional member. It coincides with the recent adoption of IVS in market rules in Nigeria which aims to bring greater transparency to the most populous country in Africa and the world’s 20th largest economy.

We spoke to ESVARBON Chairman, Sir Nweke Umezuruike (pictured above with IVSC Chairman Sir David Tweedie and ESVARBON Board member Victor Alonge at the recent AGM in Dubai), about the work of the organisation and the growing maturity of the valuation profession in Nigeria.

“As we often remind ourselves, the world is a global village. Foreign direct investments are coming to Nigeria and if Nigeria gains investors' confidence, more investment will come. It is important therefore that valuers in Nigeria are seen as keeping to international norms, especially as set out in IVS. Our Board is empowered by law to regulate the valuation profession and we have resolved not just to bark but also to bite!”

A new, free to download business valuation journal was launched earlier this month at the OIV Annual Conference in Milan. The journal, which is sponsored by the OIV and available to download from the IVSC website, will share pertinent articles and essays on global topics within the business valuation profession.

Edition ‘0’ of the new journal was published this month and the IVSC spoke to its editor and member of the IVSC Standards Review Board, Professor Mauro Bini of Bocconi University, to find out more about the origin and ambition of the journal.

“This new journal aims to be a bridge among national communities of business valuers, with the objective of facilitating the exchange of experiences and competencies. Our hope is that it will help to overcome national barriers”

Why is it important that the business valuation community has this new platform for sharing ideas?

While business valuation is global in scope, there is a very limited number of platforms where experts from different countries can debate advanced professional issues. In fact, the profession is still highly fragmented.

Due to language and jurisdiction barriers, many manuals, documents and valuation practices remain confined to their countries of origin. Accordingly, it follows that many good practices developed in a country – and there are plenty out there! – may not be known abroad. Sometimes, the application of these approaches outside the country of origin can be met with suspicion, even when common valuation standards are adopted.

The different cultural references in terms of standards, concepts and methodologies can act as a barrier to their use elsewhere, with the result that significant professional growth opportunities may be lost.

This new journal aims to be a bridge among national communities of business valuers, with the objective of facilitating the exchange of experiences and competencies. Our hope is that it will help to overcome national barriers in terms of false prejudice and preconceived notions regarding experiences developed in different contexts.

What future themes and topics do you expect to be covered in the journal?

The journal strives to share domestic experiences in business valuation practice to provide solutions…

Continue reading the full interview here

Issue 1 of the OIV Business Valuation Journal will be published in spring 2019. You can download the journal for free on the IVSC website and it will be promoted through eNews.

The IVSC is pleased to welcome the following new members, proposed in October:

The following applications were approved and proposed by the Membership Committee:

If you have any comments you would like to make regarding to these, please do so by emailing us within 4 weeks via contact@ivsc.org

Last month, the Tangible Assets Board, Business Valuation Board and Standards Review Board met over three days at the IVSC AGM in Dubai. The meetings included closed and public sessions as well as joint meetings. An overview of the meeting topics and outcomes is set out below:

Tangible Assets Board (TAB):

The TAB looked at responses to technical revisions exposure draft which was open earlier in the year and which closed on 16 October. The board reviewed feedback relating to topics within their field of expertise and agreed to publish a revised and final version of the technical revisions proposals in Q1 2019. These technical revisions will be incorporated into IVS and will be published along with details of thier effective date.
The board also considered points arising from discussions earlier in the year with the Appraisal Foundation (US) and the Appraisal Institute of Canada (AIC) on further reducing the small differences between USPAP, CUSPAP and IVS. They considered a number of definitions which could be incorporated into IVS in order to support and further this process of alignment.
The board spent time considering a number of substantive topics, with a view to determining if and how they should be reflected in future updates to IVS: 1. ‘Allocation of Value’ and 2. ‘Valuation Modelling’. In both areas the board is looking at producing additional valuation standards. In the case of valuation modelling, the board heard from representatives of Hypzert on the theme of modelling long term value as required for secured ending in Germany. The board also looked at the subject of 3. 'Social Value' – the process by which broader societal benefits are reflected in the valuation of an asset. This is a topic which is increasingly featuring in the areas like public procurement and valuation, and the board will continue to explore whether in some way it can and should be incorporated into IVS.
The board reviewed feedback on the suggested amendments to Development Value (IVS410). It was concluded that further consideration was necessary to avoid this section of the Standards becoming over prescriptive in comparison to other sections.
The board revisited the topic of biological assets and cryptocurrencies – a subject which has come up in recent meetings. It was determined that, in fact, IVS as currently drafted accommodates principles on how these assets should be valued. However, it was acknowledged that the relevant standards were spread over more than one chapter and that additional guidance in the form of a ‘roadmap’ for valuers would be useful to help them navigate the relevant parts of IVS. This is something the board will look to develop over the next year.

Business Valuation Board (BVB):

The BVB continued to focus on an exposure draft for non-financial liabilities. It is hoped that this exposure draft will be ready for publication in the first half of 2019 and will be made available for public consultation via the IVSC website.
The board also considered feedback to the technical revisions consultation and will set out their final proposals in a joint updated with the Tangible Assets Board in Q1 2019 (see above).
The BVB received a presentation from a senior representative of Dubai Land Department on the subject of blockchain. Dubai is at the forefront of efforts to integrate blockchain in a number of sectors and the meeting focused on how and where standards can support, and be supported through the development of this evolving technology.

Standards Review Board (SRB)

The SRB also looked at the responses to the technical revisions consultation and worked with the chairs of the TAB and BVB to determine the way forward. They discussed the idea of setting up a Technical Enquiries service where issues can be raised with IVSC and answers provided. The idea will be further developed in the early part of 2019.
The SRB, with input from the TAB and BVB identified a number of topics which may warrant further exploration in regards to IVS. These included: arts and antiques; blockchain and cryptocurrencies; complex securities; inter-company considerations and special topics; trade related properties and trophy assets. A gap analysis will help to determine where there may be a need within IVS to reflect any or all of these topics.
The board also considered amendments to the future standards development process, with an emphasis on embedding a clear and structured programme for periodic review, consultation and revisions. The board is expected to publish proposals in 2019.

All three boards trailed new approaches to increase public participation in their meetings during the AGM, including the use of an app for live surveys. It is hoped that future meetings can benefit from this type of technology which will allow audiences to share their insights and perspectives with the boards in real time.

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