The purpose of valuation may be summarized as under –
♦ For return on investment.
Purchase of a business return on investment is an important consideration.
♦ Purchasing the controlling interest in a business.
This serves the same purpose as the purchase of an active business. However, the part purchased should have a higher value than its strict proportion to the whole.
♦ Marketing a company’s share.
A sufficient number of people should be interested in buying shares.
- Buying a share in a business:
- The likely pattern of income receivable in terms of income and capital gain is an important consideration.
- Acquiring assets: The purpose here is to acquire a business or a part thereof in order to obtain the assets which it holds.
- For estate duty purpose: An unquoted business requires a value to be placed upon its shares for estate duty purpose, since in this case no market price is available.
For insurance cover: This is largely concerned with the costs of replacing the relevant assets.
Security against loan: The lender is concerned with the realizable value of the assets of a firm.
Although, Purposes of valuations might be depend on the business structural objects. Some valuers prepares valuations for the following purposes:
Mortgage valuations are carried out for all classes of property. Valuers are particularly alert to special issues that may impact adversely on the value and/or marketability of the subject property, for example, contamination, salinity.
Insurance valuations can be prepared for all types of property. Insurance valuations include replacement cost of the subject building on a ‘replacement cost new’ basis, allowances for demolition and removal of debris, professional and consultants’ fees, and future escalation in building costs. If required by the client, loss of rent during the rebuilding period can be included within the valuation.
Sale and Acquisition.
Valuers prepares valuations for clients wishing to sell property as well as for clients wishing to acquire property.
Valuers provides advice to the acquiring body or landowner in accordance with the Land Acquisition (Just Terms Compensation) Act 1991.
Mass Appraisals are carried out for bodies controlling large numbers of properties, for example, Defence Housing Authority and Department of Housing.
Valuations are carried out for specific statutory requirements including Stamp Duty and Capital Gains Tax Assessment.
♦ Valuation Purposes-