PROPERTY JOURNAL

Insight sought on new public-sector EUV standard

With market confusion over the interpretation of existing use value in public-sector financial reporting, RICS is preparing a new standard – and encourages members to offer their input

Author:

  • Jonathan Fothergill FRICS

03 April 2023

Abstract photo close-up view of modern building façade

Practitioners involved in valuing public-sector, owner-occupied properties are sometimes interpreting existing use value (EUV) and the conceptual framework in UK VPGA 6 in different ways – and this is leading to confusion and inconsistency.

The interpretation and practical application of service potential in the definition of EUV in VPGA 6 of the RICS Valuation – Global Standards (Red Book Global Standards): UK National Supplement seems to have given valuers the most difficulty – more so, given that the concept is generally better understood by accountants. 

Other issues that have arisen include different interpretations of how to deal with vacant possession. Are valuers assessing the value of the actual property in use, or potentially a different property in an alternative, lower-value location? And when is it appropriate to draw the line between a specialised and a non-specialised property?

Standard aims to clarify interpretation

Recognising these issues, RICS convened an expert working group of stakeholders involved in public-sector valuation in autumn 2021 to clarify how to interpret and apply UK VPGA 6, which has itself been updated as part of this process.

Enabling a more consistent approach, a new professional standard prepared by the working group will also recommend best practice for making such valuations. The document is intended to help members by explaining and reaffirming the principles underpinning EUV when used in public-sector financial reporting. 

The target readers for the standard are practising valuers dealing with public-sector valuations, as well as auditors, end users of valuations such as local authority finance departments, and other stakeholders involved in the process. All are in need of a consistent approach to EUV application. 

In following the requirements of this professional standard, members and firms may wish to carry out internal checks or reviews to ensure they comply fully with the Red Book Global Standards when undertaking valuations in this area.

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Members can offer valuable feedback

RICS is consulting on the new standard, Existing use valuations for UK and Ireland public sector financial statements, from 3 April 2023. 

We would like to hear from all members working in this area of practice. We want a representative view of the market from professionals interpreting and applying this valuation basis, particularly given its importance in public-sector financial reporting and the shift in focus to providing figures for the balance sheet.

Members can access the consultation until 1 May 2023.

Jonathan Fothergill FRICS is a senior specialist in the valuation and investment advisory team at RICS

Contact Jonathan: Email

Related competencies include: Valuation, Valuation of businesses and intangible assets

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