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    IVSC eNews
February/March 2019
In this edition:
  • European Banking Authority (EBA) publishes handbook on valuation
  • Brand Finance joins the IVSC - we speak to their CEO and founder, David Haigh
  • Consultation: IVS 220 Non-Financial Liabilities - have your say!
  • New and proposed IVSC members
  • Dates for your diary
  • Download IVS online

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What are the International Valuation Standards? Click to learn more
European Banking Authority (EBA) publishes handbook on valuation under the Bank Recovery and Resolution Directive

The European Banking Authority (EBA) has this month published a Handbook on Valuation for Purposes of Resolution. The Handbook, which is addressed to central banks throughout the EU, seek to foster convergence and consistency in valuation practices as well as the interaction with independent valuers across the EU.

The Handbook has been developed in consultation with the IVSC and includes provisions set out across the IVS 2017 General Standards, identified as an authoritative source of reference on market best practice.

The Handbook provides guidance on the practical steps of the valuation process, on the specific valuation criteria applicable to the various resolution tools and, with a view to facilitating the adoption of an informed decision by the resolution authority, by indicating the content that is expected to be included in the valuation report.

The adoption of the Handbook relies on Article 29(2) of Regulation (EU) No 1093/2010 establishing the EBA. The Handbook follows the earlier publication of a Framework for Valuation by the European Single Resolution Board (SRB), which also references IVS and which aims to provide the general public and future potential valuers with an indication of expectations of the SRB regarding the principles and methodologies for valuation.
 
What's the world's fastest growing brand in 2019....?

From football clubs to commercial banks; luxury fashion houses to countries, Brand Finance measures the strength and value of brands throughout the world.

Upon joining the IVSC as a corporate member this month, we spoke to CEO and founder, David Haigh, to find out more about their work and the growing importance of brand in assessing and driving business value.


 

How have you seen businesses change the way they think about brand as a strategic asset over the last decade?

In the past there has been a tendency to think of brands simply as logos and of marketing as a necessary cost. Increasingly, businesses are noticing that branding and marketing can be used as a differentiator to build volume, price, and numerous other benefits to businesses.

They also note that with the emergence of big databases and much cheaper market research, it is easier to find out what works in building value. Coupled with the fact that many businesses are having to confront this for financial reporting and tax reasons, businesses are getting on board with the idea that brands and other intangibles can and should be valued.

 

How has brand valuation been advanced in recent years? What developments have supported enhanced accuracy in determining brand values?

When Sir David Tweedie valued the Smirnoff brand in 1987 and other brands were put on balance sheets for the first time in the late 1980s, it caused an uproar because the concept was new, with many claiming it was creative accounting. Following that, financial reporting bodies worked to update accounting standards that everyone could agree on.

In 2003, IFRS 3 (Business Combinations), IAS 38 (Intangible Assets), and IAS 36 (Impairment Reviews) were all created to overcome the issues, and most local GAAPs followed suit with similar standards and rules. IFRS 3 mandated that the value of an acquired business should be split between all assets – tangible and intangible – plus general goodwill; IAS 38 defined intangible assets; IAS 36 stated that the value of all of these identified assets should be reviewed for impairment every year. These standards – while stopping short of allowing internally generated intangibles being put on the balance sheet – formally endorsed the idea that intangible assets have value and can be valued accurately.

 

The Brand Finance Global 500 league table will be familiar to many eNews subscribers. What trends have you identified in recent years and what interesting insights can you give us from the latest data?

Every year, Brand Finance values around 5,000 brands. The world's 500 most valuable brands are included in the annual Brand Finance Global 500 report, which this year was launched at the World Economic Forum in Davos. Then throughout the year, we roll out around 80 rankings of the most valuable and strongest brands in all sectors and countries.

This year, Amazon defended its position as the world’s most valuable brand following 25% growth to US$187.9 billion, with Apple and Google placed 2nd and 3rd. With tech brands dominating the ranking, Microsoft made a comeback to top 5 with 47% brand value growth, but Facebook saw its brand strength tarnished by scandals.

Looking at regional trends, brands from China continued to climb up the ranking as the country’s total brand value in the Brand Finance Global 500 broke US$1 trillion for the first time. Interestingly, the fastest growing brand in 2019 is...


Click here to read the full interview on the IVSC website
 

Consultation: IVS 220 Non-Financial Liabilities - have your say!


Feedback received during the agenda consultation in 2017 and 2018 highlighted an interest in, and demand for, greater guidance on valuation of non-financial liabilities.

The IVSC’s Business Valuation Board has now published for consultation a new chapter for IVS (IVS 220) which covers non-financial liabilities. The consultation is open until 01 April 2019 and comments should be sent to comments@ivsc.org

The IVS Framework and the definition of Market Value specifically state that the standards can be applied to the valuation of both 'assets' and 'liabilities'.  However, IVS 2017 contains no definition of what constitutes a liability, little consideration of characteristics or attributes that are specific to liabilities as opposed to assets, or standards specific to the valuation of liabilities.  

Additionally, investigations by the Boards have established a lack of guidance in the broader marketplace related to the valuation of non-financial liabilities.  Such factors, combined with the unique issues faced when valuing non-financial liabilities and significant divergence in practice, suggests that standards would be helpful toward improving consistency and quality in the marketplace.

Furthermore, with the formation of the Financial Instruments Board, the proposed chapter takes on increased importance as the IVSC looks to help stakeholders navigate the various nuances that separate financial, from non-financial, liabilities.   

You can download the Exposure Draft here.
New and proposed IVSC members
The IVSC is pleased to welcome the following new members (as proposed in December):
The following applications were received and approved by the Membership Committee:  If you have any comments regarding proposed members, please do so by emailing us within 4 weeks via contact@ivsc.org
 
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Dates for your dairy

Find out more about the major valuation events and conferences taking place around the world and register by clicking the links.
 
19 MarchNigerian Institute of Estate Surveyors and Valuers Annual Conference, Lagos
26 March: RICS Valuation Conference 2019, London
18-20 March: NCREIF Winter Conference 2019, Phoenix, AZ
30 April: ASA Fair Value Conference, New York
12-15 May: CFA Institute 72nd Annual Conference, London
17-20 May: CFA  73rd Institute Annual Conference, Georgia, US
13 May: RICS World Built Environment Forum, New York
03 June: RICS Business Valuation Summit 2019, New York
05 June: Appraisal Institute of Canada Annual Conference 2019, Newfoundland
06 June: RICS Bridging International Valuation Standards Conference, Los Angeles
13-14 June: IVSC-WAVO Global Valuation Conference 2019, Frankfurt
18-21 June: NCREIF Summer Conference 2019, Washington, DC
06 September: ANEVAR International Valuation Conference, Bucharest

Does your organisation have a valuation event coming up? To list it here please email details to contact@ivsc.org 
Download IVS online
Subscribing to IVS Online gives you access to the latest IVS standards and publications, including translations produced by Valuation Professional Organisations.

**Please note that if you are a sponsor organisation of the IVSC then access to IVS online is free of charge with the code provided. IVSC member organisations will receive an electronic copy of IVS.**

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