ABSTRACT
We looked in the last chapter at the main requirements from different bodies on the valuation of properties in company — and particularly quoted property company — accounts. To summarise:
The most comprehensive valuations of the properties that a property company owns are required when it launches on the stock market, when it uses an “asset value defence” in a takeover bid or when it publishes a valuation in connection with a mortgage debenture issue.
Ongoing valuation requirements are far less rigorous. The accounting standard recommends an independent valuation of investment properties at least every five years. The Companies Act simply requires an estimate of the difference between book value and market value when this is significant.
If a property company chooses to classify its properties as trading stock rather than fixed assets they will normally be shown at cost and most of the requirements to provide a valuation do not apply — except possibly in a stock market launch.
The treatment of properties under development is problematic. Companies will normally show them at cost until completed and let. But in a market launch or an asset-based bid defence they will be required to estimate eventual value and the costs involved in completing them.
Requirements as to methods of valuation are normally expressed in terms of the Guidance Notes of the Royal Institution of Chartered Surveyors (RICS).
