Bases of Valuation

1.Forced Sale (Liquidation) Value - The amount which may reasonably be received from the sale of a property within a time frame too short to meet the marketing time frame of the Market Value definition. In some States forced sale value in particular may also involve an unwilling seller and a buyer or buyers who buy with knowledge of the disadvantage of the seller.

2.Going Concern Value - The value of a business as a whole. The concept involves valuation of a continuing enterprise from which allocations, or apportionments, of overall going concern value may be made to constituent parts as they contribute to the whole, but none of the components in themselves constitutes a basis for Market Value.

If the premises used are owned by the business, they form part of the going concern value on the basis of their value to the business. The concept involves valuation of a continuing entity from which allocations or apportionments of overall going concern value may be made to constituent parts as they contribute to the whole, but none of the components of themselves constitute market value.

3.Investment Value or Worth - The value of property to a particular investor, or a class of investors, for identified investment objectives. This subjective concept relates specific property to a specific investor, group of investors, or entity with identifiable investment objectives and/or criteria. The investment value, or worth, of a property asset may be higher or lower than the Market Value of the property asset. The term, investment value, or worth, should not be confused with the market value of an investment property.

4.Market Value - The estimated amount for which a property should exchange on the date of valuation between a wiling buyer and a wiling seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

The concept of Market Value reflects the collective perceptions and actions of a market and is the basis for valuing most resources in market-based economies. The professionally derived Market Value is an objective valuation of identified ownership rights to specific property as of a given date.

5.Non-Market Bases of Value - Valuations of property use methods that consider the economic utility or functions of an asset, other than is ability to be bought and sold by market participants, or the effects of unusual or atypical market conditions.

6.Value in Use

i)       The value a specific property has for a specific user and therefore non-market related. This value type focuses on the value that specific property contributes to the entity of which it is a part, without regard to the property’s highest and best use or the monetary amount that might be realized upon its sale.

ii)     The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

iii)   The present value of the future cash flows expected to be derived from an asset or cash generating unit.

It should be noted that the above definitions, which apply to financial reporting, consider the value of an asset at the end of its useful life. This meaning differs from the way the term is commonly used in valuation practice.

Sources : International Valuation Standards Seventh Edition 2005