MINSITRY OF FINANCE | SOCIALIST REPUBLIC OF VIETNAM |
No.158/2014/TT-BTC | Hanoi, October 27, 2014 |
CIRCULAR
PROMULGATING VIETNAMESE VALUATION STANDARD NO.01, 02, 03 AND 04
Pursuant to the Law on Prices No.11/2012/QH13 dated June 20, 2012;
Pursuant to Decree No.89/2013/ND-CP dated August 06, 2013 of the Government on enforcement of a number articles regarding valuation of the Law on Prices;
Pursuant to Decree No.215/2013/ND-CP dated December 23, 2013 of the Government on functions, duties, rights and organizational structure of the Ministry of Finance;
At the request of the Director of Price Management Department,
The Minister of Finance promulgates a Circular on Vietnamese valuation standard No.1, 2, 3 and 4.
Article 1. Four Vietnamese Valuation Standards issued together with this Circular shall be named and numbered as follows:
- Vietnamese Valuation Standard No.01 – Ethical principles for valuation practice;
- Vietnamese Valuation Standard No.02 – Market value as the basis for valuation;
- Vietnamese Valuation Standard No.03 – Non-market value as the basis for valuation;
- Vietnamese Valuation Standard No.04 – Economic principles affecting valuation.
Article 2. Effect
1. This Circular comes into force from January 01, 2015.
2. Vietnamese Valuation Standards include Standard No.01 – Market value as the basis for asset valuation, Standard No.03 – Ethical principles for asset valuation practice issued together with Decision No.24/2005/QD-BTC dated April 18, 2005 promulgating 3 Vietnamese Valuation Standards; Standard No.02 – Non-market value as the basis for asset valuation, Standard No.06 – Economic principles affecting asset valuation issued together with Decision No.77/2005/QD-BTC dated November 01, 2005 of the Minister of Finance on promulgating 3 Vietnamese Valuation Standards (stage 2) will expire from the effective date of this Circular.
Article 3. Implementation
1. The Price Management Department shall take charge and cooperate with relevant agencies in providing guidelines and checking compliance with regulations specified in Valuation Standards issued thereto and relevant legislative documents.
2. Should any question arise during implementation, entities concerned shall inform the Ministry of Finance for further instructions and amendments./.
| PP. MINISTER |
VIETNAMESE VALUATION STANDARD SYSTEM
Vietnamese Valuation Standard No.01
Ethical principles for valuation practice
(Code: TDGVN 01)
(Issued together with Circular No.158/2014/TT-BTC dated October 27, 2014 of the Minister of Finance)
I. GENERAL PROVISIONS
1. Scope: This standard provides for ethical principles applied to professional valuers and valuation enterprises during the valuation process.
2. Regulated entities: This standard applies to valuers, valuation enterprises and other organizations and individuals carrying out valuation as prescribed in the Law on Prices and other relevant law provisions.
3. Clients asking for valuation and third parties who use the valuation results under signed valuation contracts must acquire necessary knowledge of principles in this standard.
II. CONTENTS
1. Valuers and valuation enterprises must abide by regulations in the Law on Prices and its guiding documents and relevant law provisions when carrying out valuation.
A valuer must be a virtue and upright person who carries out valuation in an honest and objective manner and satisfy standards applied to valuers specified in the Law on Prices and guiding documents thereof.
2. The valuer who signs the valuation result report and valuation certification shall be responsible for the valuation result to the law, legal representative and Director General or Director of the valuation enterprise.
The legal representative, Director General or Director of the valuation enterprise shall be ultimately responsible for accuracy, honesty and objectivity of the valuation result to the law, its clients and the third party which is determined by the client and named in the valuation contract under agreement between such client and the enterprise.
3. Ethical standards and professional qualifications include:
a) Independence;
b) Honesty;
c) Impartiality;
d) Confidentiality;
dd) Transparency;
e) Professional capacity and carefulness;
g) Professional status;
h) Professional-standard compliance
4. With regard to independence
- Independence is the basic principle applied to valuation enterprises and valuers.
- During valuation, the valuer and valuation enterprise must ensure their professional independence, and not be controlled or affected by any physical or mental interests which may produce a negative effect on the honesty and objectivity of such valuation and valuation result.
- The valuer and valuation enterprise shall not consent to carry out valuation for assets not permitted for valuation specified in the Law on Prices and guiding documents. Should there be any limitation on independence during valuation, the valuer and valuation enterprise shall take possible measures to lower such limitation. In case failing to minimize such limitation, the valuer and valuation enterprise must specify the aforesaid limitation in the valuation result report or refuse to carry out valuation.
- The valuer shall give comments in an independent and objective manner and specify whether he/she completely or partially concurs with or does not concur with the valuation result report provided by another valuer.
5. With regard to honesty
- The valuer must carry out valuation in an honest manner and clearly state his/her personal viewpoint of such valuation.
- The valuer must honestly declare his/her professional qualifications and professional capacity and ensure that he/her and inferior assistants strictly comply with law provisions on valuation and regulations of the Vietnamese Valuation Standard system when making valuation.
- The valuer shall refuse to make valuation if not eligible to do such valuation or being affected by any restriction that may falsify the valuation result.
6. With regard to impartiality
- The valuer must collect documents and use such documents to analyze factors affecting the valuation in an unbiased and truthful manner.
- Valuation is not permitted to be carried out if the valuation conclusion and valuation result have been decided before such valuation.
- The valuer and valuation enterprise shall verify information and data provided by their clients in order to confirm the conformity of such information and data. In case the verification of such information and data is limited, the valuator must specify such limit in the valuation report or valuation certification.
- Valuation is not permitted to be carried out upon consideration of suppositions without feasible, weighty and convincing argumentations.
7. With regard to confidentiality
- The valuer and valuation enterprise shall not reveal information provided in the valuation dossier or information on their clients or the subject asset without consent of such clients or if not legally accepted. Information on the valuation dossier, client and subject asset is considered non-public information related to the client and valued asset provided by such client and collected by the valuation enterprise during the valuation.
- The valuer and valuation enterprise may request other individuals to participate in the valuation and keep the valuation dossier confidential.
8. With regard to transparency
- All legal documents that indicate legality and technical characteristics of the asset and the valuation result must be provided clearly and sufficiently in the valuation result report.
- The valuation result report must clearly demonstrate binding conditions for job and scope of work, limitation conditions and suppositions given by the valuer.
- The valuer and valuation enterprise must provide conditions for limitations and overcoming as agreed with their clients in the valuation result report.
- The valuation service charge shall be calculated under agreement between the valuation enterprise and its client according to legal bases provided in the Law on Prices and guiding documents and the valuation contract; in case of valuation service bidding, the valuation charge shall be determined as per provisions of the Law on Bidding regarding contracts for procurement of advisory service provision. The valuation enterprise shall decide and quote the price for valuation service.
9. With regard to professional capacity and carefulness
- The valuer shall carry out valuation at full of his/her professional capacity in a diligent and careful manner and take into account all data collected before giving any proposal to the Director General or Director of the valuation enterprise.
- The valuer is required to keep improving his/her professional knowledge and skills as well as accumulating more experience through practice or legal bases. The valuer is obliged to enroll on annual training course in professional knowledge improvement offered by the agency permitted to run such course.
- The valuation enterprise shall encourage and enable its valuers to enroll on the training course in professional knowledge and skill improvement as regulated and apply technology advance in valuation in order to satisfy the valuation requirements for the purpose of providing the best valuation service for the clients.
- The valuation enterprise shall take necessary measures to ensure that its valuers complete essential training course and are under appropriate supervision.
- The valuation enterprise shall purchase compulsory insurance for valuation-related activities or set up a provision for professional risk.
10. With regard to professional status
- The evaluation enterprise and valuer shall enhance and protect their prestige, not take actions that lower such professional prestige or not struggle for clients by performing the following actions: prevention, threat, manipulation, corruption and other unfair competitive acts.
- The valuation enterprise and valuer may participate in professional organization of domestic and overseas valuation as per law provisions.
11. With regard to professional-standard compliance
- The valuer and valuation enterprise shall carry out valuation under technical and professional standards specified in the Vietnamese Valuation Standard system and other provisions of relevant law soft in force.
- The valuer and valuation enterprise may hire a consultancy that is eligible, as accepted by laws in force, to provide advice and make professional conclusion serving the valuation purpose.
12. Ethical principles specified in this standard must be clarified and complied during formulation of valuation procedure and control of quality of valuation service provided by valuation enterprises./.
VIETNAMESE VALUATION STANDARD SYSTEM
Vietnamese Valuation Standard No.02
Market value as the basis for valuation
(Code: TDGVN 02)
(Issued together with Circular No.158/2014/TT-BTC dated October 27, 2014 of the Minister of Finance)
I. GENERAL PROVISIONS
1. Scope: This standard provides for asset market value and use of market value as a basis for asset valuation.
2. Regulated entities: This standard applies to professional valuers (hereinafter referred to as “valuers”), valuation enterprises and other organizations and individuals carrying out valuation as prescribed in the Law on Prices and other relevant law provisions.
II. CONTENTS
1. “basis of asset value” means the market value basis or non-market value basis. Asset value estimated based upon the market value means the market value determined by valuation approaches under provisions of the Vietnamese Valuation Standard system.
2. “market value” means the asset price estimated at valuation time in valuation place by a willing buyer and a willing seller of which actions are taken in a knowledgeable, careful and unconstrained manner in an independent and fair transaction. Where:
a) “valuation time and valuation place” means the particular time and space for determining value of the subject asset associated with supply and demand, market taste and purchasing power.
b) “a willing buyer” means any buyer who is able and demands to buy the asset at the best price in the market.
c) “a willing seller” means any seller who owns the asset legally and demands to sell such asset at the best price in the market.
d) “independent and fair transaction with sufficient information” means any transaction between the parties without special relationships that affect the transaction price of the asset in which the parties involved have enough time for survey and access to information on the asset and asset market after being exposure to asset marketing.
Special relationships that affect the transaction price of the asset include:
- Blood relationship: Parents, spouse, children, siblings;
- Immediate family relationship: spouse and persons in relationships with parents, children, siblings and other economically dependent persons;
- Company relationship: Organizations under control, ownership or management of another company or any organization which is easily determined by the third party as a domestic or international part of another company such as parent company, subsidiary, branch and representative office;
- Other special relationships prescribed by relevant law provisions
dd) “action taken in a knowledgeable, careful and unconstrained manner” means, when participating in a transaction, the parties involved have legal capacity and take into account all offers and select the best one upon consideration of information provided in the market before deciding to willingly buy or sell an asset, not overzealous or constrained to buy or sell such asset to achieve the best price beneficial to both parties.
3. The market value represents the asset price in an open and competitive market. This market may be a domestic or international market with participation by a great quantity of buyers and sellers or a limited number of buyers and sellers.
4. In case the there is a limitation on determination of the asset market value (such as market information and data or valuation conditions or other limitations), the valuer must specify causes and solutions (if any) as well as impacts of such limitation on the valuation result in the valuation result report./.
VIETNAMESE VALUATION STANDARD SYSTEM
Vietnamese Valuation Standard No.03
Non-market value as the basis for valuation
(Code: TDGVN 03)
(Issued together with Circular No.158/2014/TT-BTC dated October 27, 2014 of the Minister of Finance)
I. GENERAL PROVISIONS
1. Scope: This standard provides for asset non-market value and use of non-market value as a basis for asset valuation.
2. Regulated entities: This standard applies to professional valuers (hereinafter referred to as “valuers”), valuation enterprises and other organizations and individuals carrying out valuation as prescribed in the Law on Prices and other relevant law provisions.
II. CONTENTS
1. “basis of asset value” means the market value basis or non-market value basis. Asset value estimated based upon non-market value means the non-market value determined by valuation approaches under provisions of the Vietnamese Valuation Standard system.
2. “non-market value” means the asset price estimated at valuation time in valuation place not reflecting the asset market value but economic-technical characteristics and function of the asset, benefits accruing from such asset during asset use or value to certain special buyers, value in limited transaction, value to certain special valuation purpose and values that do not symbolize other market values. Non-market value may be reflected by the following types of value: distressed sale value, special value, investment value, taxable value or other values. To be specific:
a) “distressed sale value” means total money amount earned from sale of an asset under a circumstance in which the time for carrying out the transaction is much shorter than the time needed for selling an asset at the market price and the seller is not willing to sell such asset. Asset price in the aforesaid transaction is considered distressed sale value and not to represent the market value of such asset.
b) “special value” means value of an asset with special characteristics that only attract special buyers or special users. The special value may be formed due to location, nature, economic-technical characteristics, legal dimension and other dimensions of the asset. Special value may be the value-in-use, limited demand asset value or dedicated asset value and other special values.
”value-in-use” means non-market value of an asset considered based upon special use of such asset for a special purpose which is not related to the market. When carrying out valuation of such asset, the valuer shall pay attention to contributions of asset value to operation of a production line, an enterprise or another asset use but not the maximum value of such asset or money amount earned from sale of such asset in the market.
“limited demand asset value” means value of an asset that is rarely demanded by the customers at a certain time in the market due to its small quantity, market conditions or impacts of other factors. Conditional sellability is a key point to distinguish this asset from others, which means, it is not that such asset cannot be sold in an open market but only sold after a long-time marketing campaign with more costs and time needed for sale than those for sale of other assets.
c) “investment value” means value of an asset to the investor according to investment objectives that have been set out.
Investment value is a value determined in a subjective manner which is related to particular assets invested by an independent investor with specified investment objectives. The difference between investment value and market value of an asset motivates investors to participate in the market.
d) “taxable value” means value of an asset used for determination of tax amount paid by asset owner under law provisions regarding asset valuation.
3. When applying non-market value basis, the valuer shall list the type of non-market value used and provide specific argumentations which include:
- Special characteristics of the subject asset;
- Special buyer or investor;
- Distressed sale or transaction carried out under unfavorable circumstance;
- Asset value estimated based upon special use purpose such as tax determination./.
VIETNAMESE VALUATION STANDARD SYSTEM
Vietnamese Valuation Standard No.04
Economic principles affecting valuation.
(Code: TDGVN 04)
(Issued together with Circular No.158/2014/TT-BTC dated October 27, 2014 of the Minister of Finance)
I. GENERAL PROVISIONS
1. Scope: This standard deals with principles for asset valuation and guidelines for adhering to such principles during valuation.
2. Regulated entities: This standard applies to professional valuers (hereinafter referred to as “valuers”), valuation enterprises and other organizations and individuals carrying out valuation as prescribed in the Law on Prices and other relevant law provisions.
II. CONTENTS
Asset value is formed by impacts of various factors such as use value, scarcity and effective demand. When carry out valuation, the valuer must conduct a study and apply basic principles below to analyze and assess factors affecting the formation of asset value and come to a conclusion about asset value.
1. Principle of highest and best use
Highest and best use is the reasonably probable and legal use of asset, which is physically possible, appropriately supported and financially feasible, and that results in the highest value.
An asset in use in reality is not required to being put to its highest and best use.
2. Principle of supply and demand
Asset value is determined by interaction between the supply of such asset and demand for such asset in the market. And such asset value also creates an impact on the supply demand for such asset. Variation of the asset value is proportional to the demand for such asset and inversely proportional to the supply of such asset. Physical characteristics and socio-economic characteristics of an asset different from characteristics of other assets are also reflected through the supply-demand and asset value.
3. Principle of change
The asset value varies according to changes in its components and influence factors.
The asset value created during constant changes reflects relationships between causes and effects of factors affecting asset value. Such factors also change constantly. As for that reason, when carrying out asset valuation, the valuer must well understanding relationships between causes and effects of such factors and analyze the change process in order to determine the highest and best use.
4. Principle of substitution
In case two or more than two assets can substitute to each other during the asset use, value of such assets shall be determined by the interaction of one to another asset.
If two assets with the same benefit are available, the one with the lowest price will be sold first. Upper limit of value of a replaceable asset tends to be set by the cost for acquiring a similar substitute provided that there is no delay in making the acquisition. A cautious buyer will not offer a price higher than the cost for acquiring a substitute in the same market at the same time.
5. Principle of balance
The most profitable or highest use is achieved when all components of an asset is in a balance. As for that reason, the valuer must analyze the balance of such components to estimate the highest and best value of the subject asset.
6. Principle of increasing and decreasing returns
Increments of investment produce greater returns up to a certain point then such increased amount will fall gradually irrespective of any further rise in the investment amount.
7. Principle for income distribution
Total income generated from combination of factors of production (including land, capital, labor and management) may be divided among such factors. If such return is distributed under the equivalence principle, the residual income after distribution to capital, labor and management will manifest the land value
8. Principle of contribution
Contribution of value of an asset component to total earnings from the whole asset produces an effect on total value of such asset.
The value of a production factor or asset component is measured by how much it adds to the value of total asset by reason of its presence or detracts from such value by its absence. When carrying out valuation of an asset component, the valuer must determine its value base upon its connection with the total asset.
This principle is considered the basic principle for consideration of feasibility of additional investment in an asset after the highest and best use of such asset is defined.
9. Principle of conformity
The most profitable or highest use of an asset is realized when such asset is found conformable to its environment. As for that reason, the valuer must analyze whether an asset is conformable to the environment when defining the highest and best use of such asset.
10. Principle of competition
Excessive profits will breed competition, which, in turn, tends to decrease and destroy profits. As for assets, competition is also realized among the assets or between an asset with another. When carry out valuation, the valuer must consider and assess impacts of competition on revenues from an asset, especially when applying income approach to value such asset.
11. Principle of anticipation of future benefits
An asset may be valued by anticipating its future benefits.
The asset value is also affected by expected market share of buyers and sellers in the market and prospected changes in such market share.
The asset value is always estimated based upon prospective future benefits from the property use right of the buyer./.
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