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(This archived article was published in 2012. More recent data is found in the articles section of our web site). The United States currently uses a cost based accounting which complies with the U.S. generally accepted accounting principles (GAAP). In this system a company purchases a property and it is valued at its initial cost and then depreciated. Our system differs from the International Financial Reporting Standards (IFRS) which is based upon fair value accounting. There is increased pressure for these two standards to converge. Most of the pressure is coming from investors who want to be able to measure apples to apples in their investments. Investors also prefer value based accounting because it gives a more accurate assessment of the company's true worth. The term mark-to-market has been used with more frequency in recent years, particularly in reference to our banking crisis. Had a mark-to-market system been used the banks would have had to report the actual value of their real estate holdings instead of the artificially high accounting value which would not reflect the market decline. This issue created a great deal of controversy at the height of the banking crisis. Convergence of the standards appears to be narrowing over time although the process has been slow. The U.S. Financial Accounting Standards Board which sets the standards for GAAP and the International Accounting Standards Board having been seeking a closer convergence of standards since 2002. The SEC issued a road map for convergence in 2008. A common definition for fair value was agreed upon in May of 2011 between FASB and IFRS. Fair value was defined as "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." With required annual updates in value, companies and their accountants will be looking for commercial real estate appraisers that can provide this service at a reasonable price. While an initial commercial appraisal that is more substantial would probably be required, the updated annual commercial real estate appraisals could be more limited. Future commercial appraisals could incorporate the original appraisal by reference and reflect changes in rent or sales prices in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) Advisory Opinion 3. Peterson Appraisal Group. Ltd. can appraise a commercial property that conforms to appropriate regulations; and do so at a reasonable cost. Our firm focuses exclusively on commercial property valuation and we have a large and professional staff. All reports are reviewed by an MAI designated appraiser.
Commercial Appraisal Compliance and the International Financial Reporting Standards
Article:(This archived article was published in 2012. More recent data is found in the articles section of our web site). The United States currently uses a cost based accounting which complies with the U.S. generally accepted accounting principles (GAAP). In this system a company purchases a property and it is valued at its initial cost and then depreciated. Our system differs from the International Financial Reporting Standards (IFRS) which is based upon fair value accounting. There is increased pressure for these two standards to converge. Most of the pressure is coming from investors who want to be able to measure apples to apples in their investments. Investors also prefer value based accounting because it gives a more accurate assessment of the company's true worth. The term mark-to-market has been used with more frequency in recent years, particularly in reference to our banking crisis. Had a mark-to-market system been used the banks would have had to report the actual value of their real estate holdings instead of the artificially high accounting value which would not reflect the market decline. This issue created a great deal of controversy at the height of the banking crisis. Convergence of the standards appears to be narrowing over time although the process has been slow. The U.S. Financial Accounting Standards Board which sets the standards for GAAP and the International Accounting Standards Board having been seeking a closer convergence of standards since 2002. The SEC issued a road map for convergence in 2008. A common definition for fair value was agreed upon in May of 2011 between FASB and IFRS. Fair value was defined as "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." With required annual updates in value, companies and their accountants will be looking for commercial real estate appraisers that can provide this service at a reasonable price. While an initial commercial appraisal that is more substantial would probably be required, the updated annual commercial real estate appraisals could be more limited. Future commercial appraisals could incorporate the original appraisal by reference and reflect changes in rent or sales prices in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) Advisory Opinion 3. Peterson Appraisal Group. Ltd. can appraise a commercial property that conforms to appropriate regulations; and do so at a reasonable cost. Our firm focuses exclusively on commercial property valuation and we have a large and professional staff. All reports are reviewed by an MAI designated appraiser.
