Issued Circular 30/2024/TT-BTC on Vietnamese Valuation Standards regarding Valuation Basis effective from July 1, 2024?
Vietnamese Valuation Standards on Valuation Basis Effective from July 1, 2024
On May 16, 2024, the Ministry of Finance issued Circular 30/2024/TT-BTC on Vietnamese Valuation Standards regarding Professional Ethics, Scope of Valuation, Valuation Basis, and Valuation Documentation.
The Vietnamese Valuation Standards on the Valuation Basis provide general provisions as follows:
(1) Scope of Adjustment
This Vietnamese Valuation Standard prescribes and provides guidance on valuation reports, valuation certificates, notifications of valuation results, and valuation dossiers in accordance with the pricing laws.
(2) Subjects of Application
- Valuation practitioners and valuation enterprises providing valuation services as per the pricing laws.
- Organizations and individuals performing state valuation activities per the pricing laws shall apply the provisions of Articles 3, 4, 8, 9, and 10 of the Vietnamese Valuation Standards on Valuation Basis.
- Organizations and individuals requesting valuation and third parties using valuation reports as per valuation contracts (if any).
Circular 30/2024/TT-BTC on Vietnamese Valuation Standards on Valuation Basis effective from July 1, 2024?
What are the Bases of Value according to the latest Vietnamese Valuation Standards on Valuation Basis?
According to Article 4 of the Vietnamese Valuation Standards on Valuation Basis in Circular 30/2024/TT-BTC, the bases of value include but are not limited to the following:
- Market Value,- Market Rent Value,- Investment Value,- Forced Sale Value,- Equitable Value.
The fair value basis is stipulated in Vietnamese laws on financial reporting and guided by the International Financial Reporting Standards (IFRS).
To be specific: What are the Valuation Bases according to the Vietnamese Valuation Standards?
According to the Vietnamese Valuation Standards on Valuation Basis issued with Circular 30/2024/TT-BTC, the specific bases of value are as follows:
(1) Market Value
- Market value is the estimated amount for which an asset could be exchanged on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently, and without compulsion.
- Market value represents a reasonable price that can be achieved in a market at the valuation date, in accordance with the concept of market value. It is an estimated price and not a predetermined amount or an actual transaction price.
- The asset value must relate to the valuation date, and this is a specific determination due to market conditions that may change over time, leading to the estimated valuation value possibly being irrelevant at a different time.
- Market value is estimated within an open and competitive market, where market participants are free to determine their buying and selling behaviors.
This market can be international or domestic, encompassing many buyers and sellers or possibly few market participants.
(2) Market Rent Value
- Market rent value is the estimated amount for which a leasehold interest in real estate would be exchanged at the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently, and without compulsion.
- Market rent value may be used as a valuation basis when valuing a lease contract or an interest created by a lease. In this case, discrepancies between the contracted rent and market rent must be considered and evaluated.
- To calculate market rent value, the valuer must consider the following factors:
+ When determining the rent value of an actual lease contract, the terms and conditions of the contract must comply with legal provisions.+ When determining a rent value not tied to an actual lease contract, the assumed terms and conditions of this hypothetical lease contract must be acceptable to the market for each type of real estate between market participants on the valuation date.
(3) Investment Value
- Investment value is the estimated amount on the valuation date of an asset for a specific owner or potential owner for a particular investment or operational purpose.
- Investment value is a basis specific to a particular subject, reflecting the benefits received by owning that asset.
Investment value often mirrors the circumstances and financial goals of the specific subject the valuation aims at and is frequently used to measure investment effectiveness.
(4) Forced Sale Value
- Forced sale value reflects an asset's value at the valuation date when the seller is compelled to sell the asset within a limited time, preventing full marketing and possibly insufficient buyer inspection of various asset-related aspects. A forced sale is an anticipated transaction scenario.
- The price achievable in a forced sale depends on the nature of the seller's pressure and the reasons why full marketing cannot be performed.
Determining forced sale value can only be realized with reasonable assumptions about the consequences of the difficulties or impossibility of selling within a set period due to seller-imposed constraints.
(5) Equitable Value
- Equitable value is the estimated price for the asset transfer between two identified parties willing to transact at the valuation location and date; this price reflects the respective parties' beneficial interests.
- Equitable value requires assessing a reasonable price between two specific identified parties, considering their respective advantages and disadvantages when conducting the transaction.
Circular 30/2024/TT-BTC takes effect on July 1, 2024.
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