Vietnam's valuation standards for Market Approach applicable from July 01, 2024

Vietnam's valuation standards for Market Approach applicable from July 01, 2024 (Image from Internet)

Vietnam's valuation standards for Market Approach applicable from July 01, 2024

Pursuant to Article 4 of the Vietnam's valuation standards for Market Approach issued together with Circular 32/2024/TT-BTC, the Market Approach is regulated as follows:

• The Market Approach determines the value of the appraised asset by comparing it with comparable assets for which market price information is available; in cases of business valuation, additional information about the prices of the appraised assets themselves can be used.

• Depending on the type of asset, the market approach can be specified through methods such as the comparison method, the average ratio method, and the transaction price method.

The average ratio method and the transaction price method apply only to business valuations and are stipulated in the Vietnam's valuation standards for Enterprise Valuation.

Regulations on applying the comparison method

+ Survey and collect information about comparable assetsJ

+ Analyze information;

+ Adjust the differences between the appraised asset and comparable assets;

+ Determine the indicative prices of comparable assets;

+ Determine the price of the appraised asset.

• The comparison method determines the value of the appraised asset by referencing, analyzing, and evaluating the comparable factors of comparable assets against the appraised asset, and then adjusting the prices of the comparable assets to estimate the appraised asset's value.

• The comparison method is applied to assets that are being openly transacted, offered, or bid on the market. An asset is considered to be openly transacted, offered, or bid on the market if at least 03 comparable assets transacted or offered by different organizations and individuals can be collected around the time and location of the appraisal.

• Execution content:

(Article 5 of Circular 32/2024/TT-BTC)

Regulations on information analysis

+ Quantitative analysis: includes paired analysis, statistical analysis, regression analysis, cost analysis, and similar methods to find the adjustment amount or percentage (%).

+ Qualitative analysis: includes relational comparison analysis, ranking analysis, and interviewing related parties.

• Information analysis aims to compare and identify similarities and differences, as well as the advantages and disadvantages according to the comparative factors between the appraised asset and the comparable assets.

• Comparative factors include qualitative and quantitative factors that express the basic characteristics of the asset, such as legal features, transaction conditions, economic and technical characteristics, and other factors that affect the asset's value.

• The analysis of information through comparative factors between the appraised asset and the comparable assets is carried out as follows:

(Article 7 of Circular 32/2024/TT-BTC)

Determination of the value of the appraised asset

- The determination of the appraised asset's value is based on the indicative prices of comparable assets combined with the qualitative analysis of the information of comparable assets (concerning information sources, reliability, and relevancy of information) and the following criteria:

+ The smallest total gross adjustment value (i.e., the smallest absolute value of adjustments);

+ The fewer the number of adjustments, the better;

+ The smaller the adjustment margin (or adjustment percentage) of a comparative factor, the better;

+ The smallest total net adjustment values, i.e., the smallest total of adjustments.

- If necessary, assess market supply and demand trends before finalizing the value of the appraised asset using the comparison method.

(Article 10 of Circular 32/2024/TT-BTC)

Le Nguyen Anh Hao

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