— Bases of value · IVS 102
Bases of value, explained
• Sections 10–80 · General requirements
• Appendix A10–A60 · IVS-defined
Introduction, bases of value, entity-specific factors, synergies, assumptions, special assumptions, transaction costs and allocation of value.
Market value, market rent, equitable value, investment value/worth, synergistic value and liquidation value. When one is used, its appendix section must be followed.
• Appendix A70–A80 · Defined by others
• Appendix A90–A120 · Premises
Other bases of value
Four premises of value
Examples of bases defined outside IVS: fair value under IFRS 13 (and US Topic 820) and legal or statutory fair value. The valuer must apply the correct external definition.
Highest and best use, current/existing use, orderly liquidation and forced sale: the assumed use of the asset, or the circumstances of its sale.
■ IVS 102 · Section 10
Introduction: what a basis of value does
A basis of value sets out the fundamental premises on which a reported value rests. It must fit the terms and intended use of the valuation, because the basis drives the choice of methods, inputs and assumptions, and ultimately the value itself (10.01).
Purpose, sources and premises
Valuation date and the parties
Why it matters (10.01): the same asset can carry several defensible values. The basis tells the reader which question the figure answers: what the market would pay, what the asset is worth to this owner, or what it would fetch in a liquidation.
Valuation date (10.04): the date determines which information may be used. Most bases exclude information or market sentiment that participants could not have known, or found with reasonable due diligence, on that date.
Sources of definitions (10.02): a valuer may be required to use bases defined by statute, regulation, a private contract or another framework, such as a tax code, a bank's credit policy or a shareholders' agreement.
Knowable, not known: a rezoning approved two weeks after the valuation date is excluded; a draft spatial plan already published for consultation on the date is knowable, and is reflected as participants would have weighed it.
Premise of value (10.03): describes the circumstances of how the asset is assumed to be used. IVS names four common premises: highest and best use, current/existing use, orderly liquidation and forced sale (A90–A120).
Party characteristics (10.05): bases differ in who is assumed to transact: (a) a hypothetical buyer or seller, (b) known or specific parties, (c) members of an identified group, (d) parties under particular conditions such as duress, and (e) an assumed level of knowledge.
Basis versus premise: the basis answers 'value to whom, in what kind of exchange'; the premise answers 'in what use or sale circumstance'. A report states both, for example market value on a highest and best use premise.
Reading the matrix: market value assumes hypothetical, informed parties under no pressure; investment value looks at one specific owner; equitable value at two identified parties; liquidation value adds a seller who is compelled to sell.
Example: a factory on land rezoned for housing. Market value under highest and best use may reflect residential redevelopment land; under current use it reflects an operating industrial site. Both are valid figures, but only one fits the client's purpose.
Example: in a retrospective valuation as at 31 March 2020 for a dispute, the valuer must screen out later evidence of how the pandemic actually unfolded, and reflect only the uncertainty participants faced on that date.
Practitioner check: before any analysis, write the basis, premise, valuation date and party profile into the terms of engagement. Many valuation disputes trace back to one of these four being left vague.
■ IVS 102 · Section 20
Bases of value: IVS-defined and other bases
IVS defines six bases of value. Every other basis comes from law, regulators, accounting standards or international agreement. The valuer must choose the basis that fits the intended use, cite its source and understand how it is interpreted (20.01–20.06).
The six IVS-defined bases (20.02)
Other bases and the valuer's duties
Market value (A10): the price between a hypothetical willing buyer and willing seller at arm's length after proper marketing. The default basis for sale advice, secured lending and most regulatory work.
Other bases (20.01, 20.03): set by jurisdictional law, local regulators, applicable standards or international agreement, for financial reporting, tax, compulsory acquisition or litigation. A70–A80 gives examples such as IFRS fair value and legal fair value.
Market rent (A20): the rental counterpart of market value for an interest in real property, always reported together with the principal lease terms assumed.
Same words, different meaning (20.03): 'fair value' under IFRS 13 is an exit price between market participants; 'fair value' in a shareholder appraisal case may exclude minority discounts. Identify who issued the definition before applying it.
Equitable value (A30): the price that is fair between two identified parties, reflecting the advantages and disadvantages each gains from the transaction.
Fit and citation (20.04): under IVS 101 Scope of Work the basis must suit the intended use, and the source of its definition must be cited or the basis explained.
Investment value/worth (A40): the value of an asset to a particular owner or prospective owner for its own investment or operational objectives.
Interpretation (20.05): the valuer must understand the regulation, case law and interpretive guidance attached to each basis used, for example how local courts treat compensation for land acquired for public purposes.
Synergistic value (A50): the value that results from combining two or more assets or interests, where the combined value exceeds the sum of the separate values.
Non-IVS definitions (20.06): the bases in A70–A80 are defined by organisations other than the IVSC, so the onus is on the valuer to apply the current and correct definition.
Liquidation value (A60): the amount realised when a compelled seller disposes of an asset or group of assets, on either an orderly or a forced premise.
Example: a bank asks for 'market value' for collateral and 'liquidation value' for its risk model. Report two clearly labelled conclusions, each with its basis, premise and source, rather than a single blended figure.
■ IVS 102 · Section 30
Entity-specific factors
Most bases look at an asset through the eyes of participants generally. Advantages or burdens available only to one particular buyer or seller are excluded, unless the basis deliberately measures value to a specific owner (30.01–30.03).
What counts as entity-specific (30.01)
Applying the test (30.02–30.03)
(a) Portfolio effects: additional value, or a reduction in value, from assembling a portfolio of similar assets, such as the premium a REIT would pay to complete its regional logistics platform.
Case by case (30.02): whether a factor is entity-specific or available to participants generally is a judgement on the facts, supported by evidence of who would realistically bid.
(b) Unique synergies: benefits from combining the asset with other assets the entity already owns, such as an adjoining plot that unlocks a larger development only for the neighbour.
Group transfers (30.02): where an asset normally trades as part of a group, synergies with the related assets pass to the buyer with the group and are not entity-specific. A hotel's land, building, FF&E and operating licences usually sell together.
(c) Rights or restrictions that apply only to the entity: a licence, permit or covenant that cannot pass to a buyer, such as a personal operating concession.
Value to a specific owner (30.03): where the basis is investment value/worth (A40), entity-specific factors must be reflected. Typical uses are (a) supporting investment decisions and (b) reviewing the performance of an asset.
(d) Tax benefits or burdens unique to the entity: tax losses, incentives or liabilities that only this owner can use or must bear, such as a tax holiday granted to a specific investor.
Example: a palm oil mill beside the owner's own plantation. Market value assumes a typical buyer sourcing fresh fruit bunches on market terms; investment value to the owner may include secure supply and lower haulage costs.
(e) A unique ability to exploit the asset: know-how, distribution or brand that only this entity can apply, for example a proprietary process run on otherwise standard production equipment.
Documentation tip: list each candidate factor, state whether it is entity-specific or available to participants, and give the evidence. Reviewers look for this reasoning, not just the conclusion.
■ IVS 102 · Section 40
Synergies
Synergies are the benefits of combining assets and/or liabilities, so that a group is worth more than the sum of its parts valued on a stand-alone basis. Whether they are included depends on the basis of value (40.01–40.03).
What synergies are (40.01)
When they count (40.02–40.03)
Definition: when synergies are present, the value of a group of assets and liabilities exceeds the sum of their individual values on a stand-alone basis.
The basis decides (40.02): for most bases, only synergies available to participants generally are included, consistent with the entity-specific test in section 30.
Cost synergies: lower operating costs, for example consolidating two head offices or sharing one distribution centre.
Participant synergies: if several typical buyers could achieve similar savings, competition prices part of that benefit into market value. Synergies only one buyer can achieve are left out.
Revenue synergies: higher sales, for example cross-selling the target's products through the acquirer's distribution network.
Amount, not route (40.03): the test can look at the size of the synergies available to participants rather than the specific way of achieving them. Different buyers may reach similar savings by different means.
Risk synergies: lower risk, for example reducing customer concentration or securing raw material supply, which can lower the required rate of return.
Where buyer-specific synergies belong: equitable value (A30) may include certain synergies between two identified parties, and synergistic value (A50) measures them directly.
Example: two adjoining shophouses, each worth IDR 4 billion alone, may be worth IDR 9.5 billion together because the combined frontage permits a larger building. The extra IDR 1.5 billion is a synergy.
Practice note: in a purchase price allocation, buyer-specific synergies sit in goodwill. Loading them into the fair value of an identifiable intangible overstates that asset and is a common review finding.
■ IVS 102 · Section 50
Assumptions
A basis of value rarely stands alone. Assumptions clarify the state of the asset in the hypothetical exchange, or the circumstances in which it is assumed to be exchanged. Because they can move value significantly, IVS sets a reasonableness test (50.01–50.04).
Purpose and nature (50.01–50.04)
Typical assumptions (50.03 a–d)
Two purposes (50.01): assumptions clarify either (a) the state of the asset in the hypothetical exchange, or (b) the circumstances under which the asset or liability is assumed to be exchanged.
(a) As a complete operational entity: the asset is transferred with the business, for example a hotel valued with its trading potential, workforce and operating licences.
Significant impact (50.02): an assumption can change value as much as any input, so it must be visible to the reader, not buried in standard terms and conditions.
(b) Without the business: assets are transferred individually or as a group without the business, for example plant and machinery valued for sale to another operator or for removal.
Consistent with the facts (50.03): ordinary assumptions concern facts that are, or could be, consistent with those existing at the valuation date, often because of agreed limits on the valuer's investigations.
(c) With complementary assets: an individually valued asset is transferred together with other assets it depends on, for example a gantry crane valued assuming its rails and power supply transfer with it.
Investigation-limit examples: no contamination where no environmental survey was provided; title free of undisclosed encumbrances; building services in working order where no specialist test was carried out.
(d) Shares as a block or individually: a 30% block may carry board representation and influence; the same shares sold in many small parcels may not. The assumption must be stated.
Compliance test (50.04): every significant assumption must be reasonable in the circumstances, supported by evidence and relevant to the intended use, for the valuation to be IVS-compliant.
Example: a cement plant valued for a merger assumes transfer as an operating business; the same plant valued for a lender's exit scenario assumes sale of assets without the business. Same equipment, different assumption, materially different value.
Wording tip: state each assumption in one sentence, say why it is made and point to the evidence. 'Assumed free of contamination' without the reason invites challenge.
■ IVS 102 · Section 60
Special assumptions
Where an assumed fact differs from the facts existing at the valuation date, it is a special assumption. The label warns users that the value depends on a change in circumstances, or reflects a view participants generally would not take on that date (60.01–60.02).
What makes an assumption special (60.01)
IVS examples and practice (60.01 a–d)
Departure from the facts: an ordinary assumption fits, or could fit, the facts on the valuation date. A special assumption knowingly departs from them.
(a) Freehold with vacant possession: for example, a let office building valued as if empty, to show the price an owner-occupier might pay.
Why it is used: to illustrate the effect of possible changes on value, such as completion of works, vacant possession, a planning consent or a signed contract.
(b) A proposed building completed on the valuation date: for example, the 'as if complete' value of a development for a construction loan, at today's market levels.
Why it is flagged: users must see that the value is contingent on a change in current circumstances, or reflects a view participants generally would not take on the valuation date.
(c) A specific contract in existence that had not actually been completed: for example, a power plant valued as if a power purchase agreement still under negotiation were signed.
Same test as other assumptions (60.02): every significant special assumption must be reasonable in the circumstances, supported by evidence and relevant to the intended use.
(d) A yield curve different from the one participants would use: for example, a financial instrument valued on a regulator-prescribed discount curve.
Reporting: state the special assumption prominently, next to the value it affects, and where useful report the value both with and without it.
Example from lending practice: a bank asks for 'as is' and 'as if complete' values for a housing project. Report both: the first on actual facts, the second under a stated special assumption with the assumed specification and completion date.
Red flag: a special assumption that cannot realistically occur, such as a permit the authority has already refused, fails the reasonableness test in 60.02.
■ IVS 102 · Sections 70–80
Transaction costs and allocation of value
Two technical rules close the general part of IVS 102: values are normally reported without adjustment for transaction costs, and any split of value into components must follow a stated, consistent method (70.01, 80.01–80.02).
Transaction costs (70.01)
Allocation of value (80.01–80.02)
The rule: most bases represent the estimated price without deducting the seller's costs of sale, adding the buyer's costs of purchase, or adjusting for taxes payable by either party as a direct result of the transaction.
Definition (80.01): allocation of value is the separate apportionment of the value of an asset on an individual or component basis.
Costs normally excluded: agency and legal fees, notary and land deed official fees, land and building acquisition duty, the seller's transfer tax, and due diligence costs.
Consistency (80.02): the allocation method must be consistent with the overall basis and premise, and the components should reconcile to the whole.
Watch the framework: some bases treat costs differently. IFRS 13 fair value excludes transaction costs but reflects transport costs where location is a characteristic of the asset; net realisable value bases deduct costs to sell.
(a) Law and regulation: follow any legal or regulatory requirements, such as tax rules on land and buildings or accounting rules on depreciable components.
Example: an apartment with a market value of IDR 2.0 billion. After tax and fees the seller may net around IDR 1.88 billion, and the buyer may pay around IDR 2.12 billion all-in. Market value remains IDR 2.0 billion.
(b) Intended use: describe clearly why the allocation is needed, such as depreciation, insurance, purchase price allocation or property tax.
Good practice: where a client needs net proceeds, report market value first, then show the costs separately in a clearly labelled reconciliation.
(c) Facts and circumstances: consider the relevant characteristics of the items, such as useful lives, separability and how participants price them.
(d) Methodology: adopt methods suited to each component, for example land by sales comparison, buildings by depreciated replacement cost, and a brand by relief-from-royalty.
Example: a hotel bought for IDR 300 billion is split into land, building, FF&E and intangibles so the owner can depreciate the building over 20 years and FF&E over 4–8 years. Each component has its own method, and the total reconciles to IDR 300 billion.
■ IVS 102 · Appendix A10
Market value
Market value is the estimated amount for which an asset and/or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion (A10.01). A10.02 requires each element to be applied as follows.
The conceptual framework (A10.02)
Market, use, inputs and exclusions (A10.03–A10.07)
(a) 'The estimated amount': a money price, the most probable price reasonably obtainable on the date: the best for the seller and the most advantageous for the buyer. It excludes prices distorted by atypical financing, sale and leaseback, special concessions or value available only to a specific party.
The market (A10.03): open and competitive, local or international, with many or few participants. It is the market in which the asset is normally exchanged.
(b) 'Should exchange': value is an estimate, not a predetermined amount or an actual sale price.
Highest and best use (A10.04): market value reflects the use that is possible, legally permissible and financially feasible and that maximises value, as a participant would have in mind when bidding.
(c) 'On the valuation date': value is time-specific and reflects the market on that date, not any other.
Consistent inputs (A10.05): every approach must use participant inputs. Income approach: market rents, yields and growth. Cost approach: market-based costs and depreciation for physical, functional and economic obsolescence.
(d) 'A willing buyer': motivated but not compelled, buying according to current market realities and expectations, and not paying more than the market requires. The present owner is part of the market.
Method choice (A10.06): the available data and market circumstances decide which methods are most relevant. Applied to properly analysed observable data, each method should indicate market value.
(e) 'A willing seller': neither over-eager nor forced, nor holding out for an unreasonable price. The seller is hypothetical, so the actual owner's circumstances are ignored.
Special purchasers excluded (A10.07): physical, geographic, economic or legal advantages available only to one buyer are disregarded, because market value assumes a willing buyer, not a particular willing buyer.
(f) 'Arm's-length transaction': between unrelated parties acting independently, not, for example, parent and subsidiary or landlord and tenant.
Example: an adjoining owner offers 30% above comparable evidence to square off his site. That premium is a special purchaser bid and is excluded from market value, though it is relevant to synergistic value (A50).
Example: an owner who must sell before a loan falls due in three weeks is not a willing seller in the A10 sense. The resulting price is a forced sale indication (A120), not market value.
■ IVS 102 · Appendix A20
Market rent
Market rent is the estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms, in an arm's-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion (A20.01).
Definition and use (A20.01–A20.03)
Contract rent and lease terms (A20.04–A20.06)
When it is used (A20.02): when valuing a lease or an interest created by a lease. The valuer considers the contract rent and, where it differs, the market rent.
Contract rent (A20.04): the rent payable under an actual lease, fixed or variable. The review frequency and basis of calculation must be understood to establish the lessor's benefits and the lessee's liability.
Same framework as market value (A20.03): the A10 framework applies. Rents inflated or deflated by special terms, considerations or concessions are excluded.
Existing lease terms (A20.05): for rent reviews and determinations, market rent may be assessed on the terms of the existing lease rather than a notional lease.
Appropriate lease terms (A20.03): the terms typically agreed in the market for that type of property on the valuation date: length, reviews, incentives, repairs and service charges.
Subject to a lease (A20.06a): the terms of that lease are the appropriate terms, unless they are illegal or contrary to overriding legislation.
Always state the terms (A20.03): market rent should only be reported together with the principal lease terms assumed. A rent without terms cannot be compared or relied on.
Not subject to a lease (A20.06b): assume a notional lease on terms typically agreed in the market for that type of property on the valuation date.
Example: two retail units are each let at IDR 1.2 million per sqm per year. One includes a three-month rent-free period and a landlord-funded fit-out; the other has neither. Their effective rents differ, so market rent must be stated on one defined set of terms.
Example: a 10-year lease has a rent review in year five 'to market rent on the terms of this lease'. The valuer prices the remaining term, user clause and repairing obligations of that lease, not a typical new three-year lease.
Valuation link: in income capitalisation, the gap between contract rent and market rent creates a reversion or over-rent, which carries different risk and should be valued separately.
■ IVS 102 · Appendix A30
Equitable value
Equitable value is the estimated price for the transfer of an asset or liability between identified, knowledgeable and willing parties that reflects the respective interests of those parties (A30.01). It is the basis IVS called 'fair value' before the 2017 edition.
The concept (A30.01–A30.03)
Uses and practice (A30.04)
Identified parties (A30.02): the price must be fair between two specific parties, considering the advantages or disadvantages each will gain from the transaction.
(a) Unquoted shareholdings (A30.04a): the price that is fair between two specific holders can differ from the market price, for example where a 49% holder buying a further 2% gains control.
Contrast with market value (A30.02): market value disregards advantages not available to participants generally; equitable value takes them into account between the two parties.
(b) Lessor and lessee (A30.04b): a fair price for the permanent transfer of a leased asset, or for cancelling the lease liability, between the two parties to the lease.
A broader concept (A30.03): often the fair price equals the market price, but equitable value can include matters market value must ignore, such as certain elements of synergistic value arising from combining the interests.
Example: two siblings each own 50% of a family company and one buys out the other. A market buyer of a 50% stake would price in the risk of deadlock, but between the siblings a pro rata share of equity value may be equitable.
Fairness, not leverage: the result is a balanced price, not the best price either side could extract through negotiating power.
Example: a tenant with 15 years left on a lease buys the freehold. The merged interest is worth more than the two interests separately; equitable value shares that marriage value between landlord and tenant.
Name history: IVS renamed this basis from 'fair value' to 'equitable value' in 2017 to avoid confusion with IFRS 13 fair value.
Engagement tip: confirm in writing who the parties are and whose interests are considered, and explain how any synergy has been shared.
■ IVS 102 · Appendix A40–A50
Investment value and synergistic value
Two IVS-defined bases measure value that market value deliberately ignores: the worth of an asset to a particular owner, and the extra value created when assets or interests are combined.
Investment value/worth (A40)
Synergistic value (A50)
Definition (A40.01): the value of an asset to a particular owner or prospective owner for individual investment or operational objectives.
Definition (A50.01): the result of combining two or more assets or interests where the combined value is more than the sum of the separate values.
Entity-specific (A40.02): it reflects the owner's own circumstances and financial objectives, such as financing, tax position and required return, and does not involve a presumed exchange.
Differs from market value when the synergies are available to only one specific buyer, because it then reflects attributes of value only to that purchaser.
Typical uses: buy, hold or sell decisions, setting a maximum bid, capital budgeting, and measuring investment performance (see 30.03).
Marriage value (A50.01): the added value above the aggregate of the separate interests is called 'marriage value' in some jurisdictions.
Can equal market value, but often does not: a buyer with cheaper capital or operating synergies may justify a higher figure; one with a high hurdle rate a lower one.
Example: a landlord's freehold reversion worth IDR 6 billion and the tenant's long leasehold worth IDR 3 billion are worth IDR 11 billion together as an unencumbered freehold. The marriage value is IDR 2 billion.
Example: a pension fund targeting a 7% return values a toll road concession at IDR 2.4 trillion, while the market, pricing at 9%, indicates IDR 2.0 trillion. The 2.4 trillion supports the fund's bid decision but is not market value.
Example: a small plot that completes the access road for a neighbouring industrial estate. Its synergistic value to that neighbour can be well above its market value as a stand-alone plot.
Reporting: name the owner, list the entity-specific inputs, and state clearly that the figure is not market value.
Practice: report the market value of each interest, the combined value and the synergy separately, so the client sees exactly what it is paying for.
■ IVS 102 · Appendix A60–A80
Liquidation value and other bases of value
Liquidation value completes the six IVS-defined bases. A70 and A80 then illustrate bases defined outside IVS: both are called fair value, but they mean different things.
Liquidation value (A60)
Fair value: IFRS and legal (A70–A80)
Definition (A60.01): the amount realised when an asset or group of assets is sold in a liquidation sale, with the seller compelled to sell as of a specific date.
IFRS 13 fair value (A70.01): the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, an exit price.
Two premises (A60.01): (a) an orderly transaction with a typical marketing period, or (b) a forced transaction with a shortened marketing period.
Global reach (A70.02): over 130 countries require or permit IFRS, and the US FASB uses the same definition in Topic 820.
Disclosure (A60.02): the valuer must state which premise is assumed. 'Liquidation value' without its premise is incomplete.
IFRS fair value in practice: the principal (or most advantageous) market, market participant assumptions, highest and best use for non-financial assets, and the Level 1–3 fair value hierarchy.
Typical uses: collateral risk assessment, insolvency and restructuring plans, auction reserves and asset-based lending.
Legal or statutory fair value (A80.01): many national, state and local agencies use fair value as defined by courts in earlier cases, for example in shareholder appraisal or oppression remedies, which may exclude minority or marketability discounts.
Example: a fleet of 40 trucks with a market value of IDR 16 billion. An orderly liquidation over four to six months might realise about IDR 13 billion; a forced auction within three weeks about IDR 10 billion.
Example: the same 20% stake can have an IFRS 13 fair value that reflects its lack of control, and a court-defined fair value equal to a pro rata share of enterprise value. Same name, different basis.
Valuer's duty (20.06): confirm the current definition, the issuing body and the relevant case law before applying any non-IVS basis.
■ IVS 102 · Appendix A90–A100
Premises of value: highest and best use and current use
A premise of value describes the use or sale circumstances assumed for the asset. The first two concern use: the use that maximises value from a participant's perspective, and the way the asset is actually used today.
Highest and best use (A90)
Current use/existing use (A100)
Definition (A90.01): the use, from a participant's perspective, that would produce the highest value for an asset.
Definition (A100.01): the current way an asset, liability, or group of assets and/or liabilities is used.
Scope (A90.02): applied mostly to non-financial assets; as many financial assets have no alternative use, it is relevant to them only in some circumstances.
Not necessarily optimal (A100.01): the current use may be, but is not necessarily, the highest and best use. Where the asset is used optimally, the two coincide (A90.04).
Four tests (A90.03): physically possible (where applicable), financially feasible, legally allowed, and resulting in the highest value. If it differs from the current use, conversion costs reduce the value.
When current use is required: some statutory, insurance and public-sector contexts specify existing use, for example specialised public buildings valued for their continuing function.
(a) Physically possible (A90.06a): judged by what participants would consider reasonable, given size, shape, soil, access and services.
Example: an old warehouse on the city fringe in a zone that now allows mid-rise housing. Its existing use value is IDR 25 billion; as residential land, after demolition and holding costs, IDR 38 billion. If redevelopment is legally permitted and feasible, market value reflects the higher figure.
(b) Legally permissible (A90.06b): zoning, building codes, permits and other restrictions, together with the likelihood that those restrictions will change.
Example: a sugar mill's boiler is worth little as scrap but contributes substantially to the operating mill. Valued as part of the group, its highest and best use is continued operation (A90.05).
(c) Financially feasible (A90.06c): the alternative use must give a typical participant a sufficient return, after conversion costs, above the return on the existing use.
Reporting tip: state the premise adopted and, where highest and best use differs from current use, show the analysis and the conversion costs.
■ IVS 102 · Appendix A110–A120
Premises of value: orderly liquidation and forced sale
The last two premises describe sales in which the seller is compelled to sell. What separates them is time: a reasonable period to find buyers, or a period too short for proper marketing.
Orderly liquidation (A110)
Forced sale (A120)
Definition (A110.01): the value of a group of assets that could be realised in a liquidation sale, given a reasonable period to find a purchaser or purchasers, with the seller compelled to sell on an as-is, where-is basis.
A description, not a basis (A120.01): 'forced sale' describes the circumstances of the exchange, a compelled seller without proper marketing, not a distinct basis of value.
Reasonable period (A110.02): varies with the type of asset and market conditions, often months for industrial plant and weeks for liquid equipment.
Price depends on the pressure (A120.01): unless the nature of, and reason for, the constraints are known, the forced sale price cannot be realistically estimated.
As-is, where-is: no refurbishment and no warranties, and the buyer bears dismantling, removal and transport. These terms are priced in.
State the reasons (A120.02): identify the constraint and the consequences of failing to sell in time. If these circumstances do not exist at the valuation date, they are special assumptions.
Link to A60: orderly liquidation is one of the two premises on which liquidation value can be determined.
Typical conditions (A120.03): a short time to sale; prevailing market conditions; prudent, knowledgeable parties; a compelled seller; no special benefits to the buyer; both acting in their own best interests; no normal marketing effort.
Example: a closed garment factory's sewing lines marketed to regional manufacturers over five months through a specialist broker. The result is an orderly liquidation value, typically well below the value in continued use.
Falling markets (A120.04): a sale in an inactive or falling market is not automatically forced. Unless a deadline prevents proper marketing, the seller is a willing seller under A10.
Evidence (A120.05): confirmed forced sales are generally excluded as market value evidence, but it can be hard to verify whether an apparently arm's-length sale was forced.
Example: a bank asks for a 'forced sale value', often a fixed percentage of market value. IVS expects the constraint to be specified, such as sale by auction within 60 days, and the figure reasoned rather than a standard haircut.
■ Applying IVS 102
Choosing the basis: common engagements
A quick reference linking typical purposes to the basis and premise most often required. Always check the governing law, regulator or contract first, and cite the source of the definition used (20.04–20.05).
Transactions, lending and reporting
Disputes, tax, insolvency and internal use
Sale or purchase advice: market value on a highest and best use premise; add investment value where the client needs its own bid ceiling.
Shareholder disputes and buyouts: equitable value between identified parties, or a court-defined fair value where statute or case law applies (A30, A80).
Secured lending: market value, plus liquidation value (orderly or forced, disclosed) where the lender's policy requires it, and an 'as if complete' value under a special assumption for development loans.
Merging interests or adjoining sites: synergistic value, with the market value of each separate interest shown alongside (A50).
Financial reporting: IFRS 13 fair value for investment property, business combinations and many impairment tests; value in use under IAS 36 is entity-specific.
Compulsory acquisition and compensation: the statutory basis in the applicable land acquisition law, which may add other heads of compensation to market value.
Purchase price allocation: IFRS 13 fair value for each identifiable asset, with participant synergies only; buyer-specific synergies fall into goodwill.
Taxation: the basis defined by the tax law or authority, applied with its own interpretive guidance and case law.
Leasing and rent reviews: market rent, on assumed notional lease terms or on the terms of the existing lease (A20.05–A20.06).
Insolvency and restructuring: liquidation value with the orderly or forced premise disclosed (A60.02), often compared with going concern value.
Insurance: usually a reinstatement cost basis set by the policy, which is not market value; state the source of the definition.
Investment decisions and performance: investment value/worth reflecting the owner's objectives, or market value for index-based performance reporting.
• Pitfall 1 of 4 · Basis
• Pitfall 2 of 4 · Synergies
A value with no stated basis, or with a basis that does not match the purpose, cannot be relied on. Agree the basis in the scope of work and cite the source of its definition.
Including savings only one buyer can achieve inflates market value. Report them separately as investment value or synergistic value.
• Pitfall 3 of 4 · Forced sale
• Pitfall 4 of 4 · Assumptions
Calling a weak market forced
Hidden special assumptions
Low prices in a falling market are not forced sales unless a deadline prevents proper marketing. Do not discard valid evidence for that reason alone.
Values “as if complete” or “with vacant possession” must be labelled as special assumptions next to the figure, not buried in an appendix.
✱ Keep learning
Read IVS 102, then go deeper
This page is Valuvix’s independent summary of IVS 102 Bases of Value and its appendix (IVS 2025). Paragraph references are to IVS 102, and the examples are illustrative and simplified. Rely on the official text for any assignment, and continue with our Approaches & Methods guide and the glossary.