Additional points prescribed under LCD guidelines that are part of the valuation report
1) Bases of value
2) Premise of value
3) intended users of the valuation report
4) business interest, ownership, and characteristics
5) Significant assumptions if any
Additions disclosures prescribed
1) Procedure followed for valuation – to be brought out clearly and matters to be included
2) certain mandatory affirmative statements and key factors which influences the valuation
Affirmative
The word affirmative simply means that you are stating something is so
An affirmative statement is any sentence or declaration that is positive
Any restrictions specified in LCD guidelines
Yes
Points to be considered in disclaimers by Valuer
1) identify the rights he/she wants to protect
2) identify the areas where he/she might be subject to liability
3) clarify that the contents of the valuation report pertain to a specific use by the company
4) caution the reader of the potential risks
However, a disclaimer will not, by itself, be able to exclude a registered valuers liability in respect of negligence in the performance of his duties
Uses of LCD guidelines
1) clarify and specificity of caveats, limitations or disclaimers – it must be clear and specific
2) duty of due care of the registered valuer – valuer shall not disclaim liability for his expertise or deny his duties of due care
3) managements responsibility – registered valuer shall prepare the valuation report of the company based on information and records concerned as provided by the management
The management remains liable for the correctness and veracity thereof
4) registered valuer to assess reliability and creditability of projections – valuer may agree or disagree with the projections if they are conjectural or bordering on the unreal and accordingly make necessary modifications
5) right to demand relevant information and basis of projections –
6) duty of registered valuer to carry out sufficient inspection, inquiry, computations, and analysis
7) Additional information in the valuation report – the effort, diligence, and level of expertise applied by the relevant registered valuer, need to be stated in the valuation report
Need of LCD guidelines
1) value depends on the purpose of valuation, where crucial economic and commercial decisions are taken on the basis of the valuation report
2) limitations arises if the registered valuer is unable to obtain sufficient information and explanations considered necessary for the purpose of a valuation
3) a disclaimer is required in a valuation report to mitigate the potential risk of registered valuer
4) valuation report should not carry a disclaimer, which has the potential to dilute the responsibility of the registered valuer or makes the valuation unsuitable for the purpose for which the valuation was conducted
5) registered valuer shall comply with such other conditions as may be imposed by the authority
1) registered valuer shall conduct valuations required under the act
2) banks and financial institutions are concerned at the sharp sip in the valuation of assets of the borrower when the account becomes NPA – valuer should take reasonable care for his valuation amount
3) detailed and fully reasoned valuation report should be prepared in every case of valuation done
Illustrative LCD in a Valuation Report
1) Restrictions on use of valuation report Our client is the only authorized user of this valuation report and is restricted for the purpose indicated in the engagement letter
2) Responsibility of Registered Valuer I/we owe a responsibility only to the authority/client that has appointed me/us under the terms of an engagement letter. We will not be liable for any losses, claims, damages, or liabilities arising out of the actions taken, omissions, or advice given by any other person
3) Accuracy of information Our engagement does not include an audit in accordance with generally accepted auditing standards of the clients existing business records
4) Achievability of the forecast results We do not provide assurance on the achievability of the results forecast by the management/owners as events and circumstances do not occur as expected
5) Post valuation date events This should be disclosed while defining the valuation date Due to possible changes in market forces and circumstances, this valuation report can only be regarded as relevant as at the valuation date
6) Range of value estimate I/We consider the valuation to be both reasonable and defensible based on the information available, others may place a different value
7) No responsibility to the actual price of the subject asset if sold or transferred/exchanged The actual market price achieved may be higher or lower than our estimate of value depending upon the circumstances of the transaction, negotiating ability, and motivation of buyers and sellers, accordingly, our valuation conclusion will not necessarily be the price at which the actual transaction takes place
8) Reliance on the representations of the owners/clients, their management, and other third parties I/We shall not be liable for any loss, damages, cost, or expenses arising from fraudulent acts, misrepresentations, or wilful default on part of the companies, their directors, employee, or agents
9) No procedure performed to corroborate information taken from reliable external sources Sources are believed to be reliable and thereof, we assume no liability for the truth or accuracy of any data, opinions, or estimates furnished by others that have been used in this analysis
10) Compliance with relevant laws This report has given no consideration to matters of a legal nature, including issues of legal title and compliance with local laws, and litigations, and other contingent liabilities that are not recorded/reflected in the balance sheet/fixed assets register provided to us
11) Multiple factors affecting the valuation report This valuation report is tempered by the exercise of judicious discretion by the registered valuer, taking into account the relevant factors
12) Future services including but not limited to testimony or attendance in courts/tribunals/authorities for the opinion of value in the valuation report I/We may be required to give testimony required by law. A party shall bear the cost/professional few of attending court etc
13) Unavailability of information as on Valuation date I/We have considered financials as on the last available financial statements as the proxy for the financial position as on the valuation date, valuation report may change post availability of such information
Illustrative limitations in valuation reports specific to tangible assets
1) Title deeds of properties Verification of Title deeds and records of Registrar’s office is beyond the agreed scope of our services
2) Legal and other issues Valuation is primarily from a business perspective and has not considered various legal and other corporate structures beyond the limited information made available
3) Sketch plans and photographs Valuer visually identify the land boundaries and dimensions, however, he is not a surveyor, so in case of doubt refer to licensed surveyor
4) Latent defects affecting the value No responsibility is assumed for latent defects of any nature whatsoever, which may affect value, or for any expertise required to disclose such conditions
5) Registered Valuers observations are not a warranty This valuation assumes unless otherwise specifically stated, that the subject is structurally sound and all components are in working condition
6) Hazardous conditions/material We have assumed that no hazardous conditions or materials exist which could affect the subject business or assets
7) Accuracy of architectural plans Sketch plans and photographs are provided as general illustrations only
8) Validity of permits and licenses This valuation does not consider the effect, if any, of non-compliance
9) Continuation of the subject business We have assumed that the business continues normally without any disruptions due to statutory or other external/internal occurrences
10) Independent third party We have acted as an independent third party and shall not be considered an advocate for any concerned party for any dispute
11) Valuation assumptions made by us If any of these assumptions prove to be incorrect then our estimate on value need to be reviewed
5) One approach Without giving any reasoning as to why the other two approaches were not considered
6) Another expert registered valuer giving disclaimer for work done by any other expert and the findings of the same does not form part of the valuation report
Examples specific to difficult situations in the valuation of land and building
1) site survey
2) survey qualifications
3) Town planning/Resource management
4) extent of nature of inquiries
5) environmental / contamination issues
6) extent of investigations in respect of structural integrity
We take all possible care for accurate & authentic news/empanelment/tender information, however, Users are requested to refer Original source of the Notice / Tender Document published by the Issuing Agency before taking any call regarding this tender.
