The International Valuation Standards Council (IVSC) is having its Annual General Meeting in Tokyo this week.  The Professional Board and Standards Board will hold their public meetings this week.  The Board of Trustees will also meet and participate in the Annual General Meeting.  In addition, there will be a meeting of the IVSC Advisory Forum, Having been involved in developing business valuation standards for well more than 20 years, it is a privilege to serve on the Professional Board of the IVSC.

So what will be going on?

Convergence of Appraisal Standards

It is no secret that accounting standards are converging towards one internationally accepted set of accounting principles (or rules).  The International Accounting Standards Board (IASB) has developed a principles-based set of accounting standards that have been adopted by some 120 nations in the world.  The United States is a current holdout; however, the Financial Accounting Standards Board (FASB) and the IASB have been working together for more than a decade towards convergence.

Convergence of accounting standards is coming. It is essential for a global economy with multinational firms and multinational investors.

So why am I talking about convergence of accounting standards?  Because it logically follows that appraisal standards will converge into one set of internationally accepted appraisal standards over time.  The IVSC has been working with a multinational group of groups and associations to encourage the adoption of its International Valuation Standards as the set of internationally accepted appraisal standards.

Note that I said that convergence of appraisal standards will logically follow. I am offering a personal opinion that this will occur over time for many or all of the same reasons that accounting standards will converge.

There will be considerable conversation about convergence at this year’s IVSC Annual Meeting.

The Standards Board

The IVSC’s Standards Board, having just published the 2013 Edition of the International Valuation Standards earlier this year, will be working on a number of projects.  Most interesting from my viewpoint as an observer of convergence of standards within the appraisal field include projects related to financial instruments:

• Credit/Debit Valuation Adjustments. This relates to the valuation of OTC derivatives and the uncertainties that these instruments create for balance sheets of financial institutions.
• Uncertainty. There is confusion between uncertainty and risk, at least at the regulatory level. The Standards Board is attempting to address these concerns.
• Derivative Valuation Methods. There are no generally accepted methods for valuing the many types of complex financial instruments, and certainly no appraisal standards.  Nevertheless, I believe that existing valuation standards, if applied by valuers of financial instruments, would go a long way towards eliminating confusion. I make the very simple observation that many valuers of financial instruments do not make their assumptions regarding expectations for future cash flows or risk sufficiently explicit to provide transparency or confidence.

Of course, the Standards Board is also working to promote the adoption of the International Valuation Standards.

The Professional Board

The Professional Board, of which I am a member, is responsible for promoting the valuation profession around the world.  We will be discussing a number of projects in this vein, including:

• Illustrative Examples.  The International Valuation Standards contain valuation concepts and principles in their Investment Framework. We will discuss the approval of an exposure draft designed to assist valuation practitioners to better understand the IVS Framework concepts by illustrating their application in various scenarios.
• Audit Process Guidance for Professional Valuers.  We will discuss the approval of a publication of the name “A Guide to the Audit Process for Professional Valuers.”  This Guide has been prepared by the Professional Board to explain the role of auditors and their interaction with professional valuers.
• Role of Valuation in Supporting Regulatory Convergence.  The Professional Board will consider a draft of a policy paper on the role of valuation to support regulatory convergence (and the convergence of appraisal standards I mentioned above).
• Professional Standards for Professional Valuers.  We will review and discuss comments on a prior discussion draft on a proposal to develop professional standards for valuers.

It will be an interesting meeting for the Professional Board.

Other Things

As with any international meeting with representatives of organizations from around the world, there will be significant interactions and meetings and things of interest.    If anything interesting comes up, I’ll report it this week as I take a break from my normal topics related to management and ownership succession.

And speaking of interesting things…

I flew to Tokyo from Memphis on Saturday.  It was a long flight, with total travel time of more than 20 hours.  Upon arrival, I stayed up until normal bedtime (but 15 hours different from Memphis) and went to bed, sleeping a normal amount of time.  When I woke up and had breakfast, I decided to go to church, as I often do when traveling.  I found St. Alban’s Episcopal (Anglican) Church just a 15 minute walk from my hotel and got directions and a map from the concierge.

As I was walking out the door, I realized that it was actually Monday morning in Tokyo, since I crossed the International Date Line on the way here.  I did recall that this church listed both Morning Prayer and Evening Prayer on a regular basis.  I attended Evening Prayer this evening.  In addition to the priest, the service was attended by one older (than me) Japanese lady.  I have attended Morning Prayer services on many occasions, but had never, until this evening, participated in an Evening Prayer service (except by reading it).

When the service ended, I stayed at the church for a couple of minutes talking to the priest.  I then left to walk back to the hotel.  After a couple of minutes, I saw the lady from church at a bus stop.  What a wonderful coincidence for that to happen.  We talked for a bit and then she said she would walk with me, since my hotel was on the way to her place.  What a lovely lady!

Needless to say, I hope the rest of the week goes well.  This evening made the entire trip worthwhile from a personal viewpoint!

Until next time,

Chris