The International Valuation Standards Council

The International Valuation Standards Council (IVSC) was created in the early 1980s by leading real estate Valuation Professional Organisations (VPOs) who recognised that capital flows are international and there was a need to create an international approach to give confidence to investors. The IVSC was granted consultative status with the United Nations in recognition of the importance of the global work.

IVSC has gone through two significant restructures. In 2009 it was expanded to include all asset classes in recognition of the increasing importance of business valuation and financial instruments, with one board covering all these specialisms.

The second restructure came in 2016. Sir David Tweedie (former IASB Chair) and the IVSC Board of Trustees brought in Nicholas Talbot on an interim, and then permanent basis to develop a new strategy and restructure IVSC.

The two key evolutions were:

1) Technical

2) Stakeholder engagement

On the technical side IVSC needed more depth of expertise which reflected the specialisms within the valuation profession. With this in mind there is now a Tangible Assets Board, Business Valuation & Intangibles Board, and a Financial Instruments Board, with an overarching Standards Review Board which has responsibility for the standards applicable to all asset classes and ensuring the asset class standards remain aligned.

In addition to enhancing the standards there is also a focus on producing thought leadership “Perspectives Papers” on new and emerging issues to stimulate debate and engage. Some of these have been downloaded tens of thousands of times and used by other standards setters to inform their own discussions.

IVSC wants to take the best ideas from wherever they are in the world and incorporate them into IVS. Our technical board members are leaders from all regions of the world and we welcome input to our forward agenda, and to our proposed updates to standards. Comments and input are published and we issue a basis of conclusions on why we decide to move in a certain direction. We are happy to have had Japanese Board members on the Business Valuation Board and Financial Instruments Board over many years.

IVSC stakeholder engagement was strong with the VPO community and to an extent with the valuation provider community but needed to be broadened to help the evolution of the standards and also embed them around the world. IVSC relies on stakeholder organisations contributing membership and sponsorship in order to perform the work we do. From 2016 IVSC took the view it wants to engage with any organisation with an interest in valuation in order to ensure the IVS address as many stakeholder needs as possible and the IVS are as technically relevant as possible. With this in mind IVSC has achieved the following in terms of enhancing engagement:

1) Significant increase in VPOs joining IVSC, and Associate VPOs which are newer professional bodies which IVSC provides advice and help to develop in line with our global guidance on what competencies should be assessed, CPD requirements, complaint mechanisms, ethical requirements etc.

2) Significant increase in valuation providers, both the largest in the world as well as mid-sized and small companies. Also stock exchange subsidiaries, and organisations with dat

3) The launch of a free Academic Forum to provide a peer network for academics looking to do research together, input to IVS, and develop teaching materials incorporating IVS.

4) The launch of a quarterly Investment Banks forum in NYC with many of the world’s top investment banks.

5) The launch of a quarterly Investors Forum which has around $23 Trillion USD AUM and includes the biggest Sovereign Wealth Funds and PE Firms in the world as well as some major pension funds, to give the investor perspective.

6) Entered into an agreement with IOSCO (whose members regulate 95% of the world’s securities) to work together with a joint valuation working group to improve valuation.

Separate to this IVSC maintains regular dialogue with the IFRS Foundation and IAASB as we believe all of our standards should be complementary and should work together. The IASB member who works closely with IVSC is Rika Suzuki from Japan and we appreciate the opportunities to exchange views and input. We are also fortunate to have renowned accountants involved in IVSC including Aiko Sekine (former JICPA President), Sir David Tweedie (original IASB Chair) and Mary Barth (former IASB as well as previously Michel Prada and Tatsumi Yamada (former IASB member). 

We work closely with central banks, audit regulators and tax authorities who all have an interest in valuation, as well as Ministers who wish to change or improve their approach to valuation in order to help their country’s financial stability or attract inward investment. Whilst recognising it is only one of many purposes for a valuation, financial reporting is important and there is strong call from the regulatory community to have a much stronger link between IVS and IFRS in relation to fair value in particular. We are actively working with our stakeholders on this as well as what additional financial reporting requirements should be added to IVS for valuers working in this area. Obviously any additional requirements need not be followed by those doing valuations for other purposes.

We are fortunate to have had numerous former Ministers become Trustees, this has included a former UK Finance Minister, our current Chair of the Board of Trustees was formerly a Singapore Finance Minister, we have had a former Canadian Senator, we have also benefitted from Committee representation from two former Indonesia Ministers. It is this kind of support as well as from business leaders which has enabled us to open an Asia office in Singapore and a MEA office in KSA.

For any organisation leaders reading this who would like to actively support and participate in IVSC and provide greater Japan input, we would welcome you becoming a member or making contact, we need leadership from across the world to make a global valuation approach a true success.

IVS are designed to be used by professional valuers as principles based standards. These should ideally be implemented by a country VPO which educates professionals on how to apply them, and provides additional guidance which a professional in a country needs in relation to local legislation, taxation approaches etc. VPOs, investors, valuation providers and regulators are really important partners to IVSC to help embed global practice locally, and to give input to the global approach.

VPOs are equally fundamental, without consistent quality professionalism it is impossible to get consistent quality valuations. Some countries have recognised this, eg, in China and India, two of the largest countries in the world, where you have to be a qualified member of a VPO in order to operate in the market. Would you want to use a surgeon without a professional qualification or without up to date training? Valuations are fundamental to pension funds, major banks, and most forms of investment, they indirectly affect every one of us, shouldn’t managers of your assets or shares understand the true value? VPOs benefit from participating in IVSC through having a voice in the global valuation approach, use of IVS and advice on developing good professionalism. VPOs also benefit from increased recognition of their professionals by major investors and employers looking for valuation professionals who can apply IVS, are ethical and maintain up to date knowledge. The network helps professionals apply the best new approaches from around the world, and develop ways of dealing with major valuation challenges at a global level.

Intangibles are ever more important, if we take the S&P 500, approximately 85% of the market capitalization is estimated to be intangibles. In the 1970s it was approximately 15%. Uber is one of the biggest taxi companies in the world yet it owns no cars. Air BnB is one of the biggest accommodation providers in the world yet it owns no hotels or houses. IVSC has an investors forum with some of the largest investors in the world, they want to be able to have a consistent high quality valuation anywhere in the world, be it to satisfy their investment committee, for financial reporting or other purposes, yet even global firms sometimes struggle to provide this where there is not a consistent professional approach with a VPO providing qualifications. Each of our countries is special to us in some way, but international investors don’t want to have to understand 195 different approaches to valuation, they want one global approach plus local knowledge of local laws, taxation etc.

Accountants have a great qualification, but being a qualified accountant doesn’t necessarily mean you are qualified to be a business valuer, something our adviser (and former Chair) - Sir David Tweedie recognises. So do the likes of AICPA which deliberately established a Business Valuation qualification and a Financial Instruments Valuation qualification, both are separate to requirements to become a CPA. Professions can start as a collective based on experience, before moving to form a VPO which after it is established moves from experience requirements to demonstrating competence through exams or case studies.

Japan is a major G7 country. It has had influence in the international approach to valuation through membership of IVSC by JICPA and JAREA, through members on the BV and FI Standards Boards at different times, through representation on the IVSC Board of Trustees for more than 10 years. Countries like China and India have seen major global investments in their countries spurring growth and wealth creation. The Japanese government rightly seeks to encourage inward investment in Japan, doesn’t it deserve a true business valuation profession to provide investor confidence to help achieve this?