1. Defvas Project In Partnership with TEGoVA and the IRRV EUROPEAN VALUATION APPLICATION - 1 VALUATION FOR THE PURPOSE OF FINANCIAL REPORTING

2. Defvas Project In Partnership with TEGoVA and the IRRV INTRODUCTION Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC The EU has since introduced most of the International Accounting standards/International Financial Reporting Standards through Commission Regulation (EC) No.1725|2003 of 29 September 2003 adopting certain international accounting standards in accordance with Regulation (EC) 1606|2002 The IAS/IFRS applicable to property-related assets are:

3. Defvas Project In Partnership with TEGoVA and the IRRV FRAMEWORK FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS The following “Framework” as adopted by the IASB in April 2001 set out the concept underlying the preparation of financial statements The objective of the financial statements Qualitative characteristics Recognition and measurement of asset

4. Defvas Project In Partnership with TEGoVA and the IRRV CLASSIFICATION OF ASSETS Land and buildings are normally classified for the purpose of financial statement into one of five categories (i)owner-occupied for the purpose of the business, whether specialised or general; (i)investment for the purpose of generating income or capital gain; (ii)surplus to the requirements of the business; (iii)trading stock, designated as current asset; and (iv)leases Property, plant and equipment Investment properties Property surplus to operational requirements Trading stock Leases

5. Defvas Project In Partnership with TEGoVA and the IRRV THE SELECTION OF CONSISTENT BASIS OF VALUATION International Accounting Standards currently adopt two models for the recognition of property asset in the balance sheet: -The Cost Model -The Fair Value Model IAS 16 - Property, plant and equipment IAS 17 – Leases IAS - 40 investment property

6. Defvas Project In Partnership with TEGoVA and the IRRV FAIR VALUE Under IAS 16, the commentary as to Fair Value is as follows: -“The fair value of land and building is usually determined from market based evidence by appraisal that is normally undertaken by professionally qualified valuers.” (IAS 16 par. 32) -“If there is no market based evidence for Fair Value because of the specialised nature of the items of property … and the items is rarely sold, except as part of a continuing business, an entity may need to estimate fair value using an income or a replacement cost approach.” (IAS 16, par 33) New Fair Value Measurement Guidance

7. Defvas Project In Partnership with TEGoVA and the IRRV APPORTIONMENT BETWEEN LAND AND BUILDINGS An apportionment may be required to allow a proper accounting to be made for depreciation Depreciation is defined as the measure of the wearing out, consumption or others loss of value of a fixed asset whether from used, passage of time or obsolescence arising from technological or market changes. The apportionment to assess the depreciable amount must be established by one of the following procedures: -Deducting from the cost or valuation of the asset the value of the land -Making an assessment of the net current replacement cost of the buildings to reflect the value of the asset to the business at the date of valuation. The land element is considered to be the bare land which is in a developable state of the purpose of the undertaking

8. Defvas Project In Partnership with TEGoVA and the IRRV DISCLOSURE PROVISIONS The instructions, date and purpose of the valuation The basis of the valuation, including type and definition of value Tenure of the property and its classification as an asset Identification of the property and its location Date and extent of the inspection Regulatory framework Any special assumptions and limiting conditions Plant, machinery and equipment Compliance statement with European Valuation Standards Methods of valuation employed; and Other matters relevant to the valuation