Future OpportunitiesFuture Opportunitiesandand

International Financial International Financial Reporting StandardsReporting Standards

(“IFRS”)(“IFRS”)Appraisal Institute of CanadaAppraisal Institute of Canada

June 6, 2008 June 6, 2008

Let’s understand the Let’s understand the environment:environment:

Over 100 countries, including UK, Over 100 countries, including UK, the EU nations, Australia and New the EU nations, Australia and New Zealand have already adopted IFRS.Zealand have already adopted IFRS.

Japan, China, India, Brazil, South Japan, China, India, Brazil, South Korea and Israel are in the process Korea and Israel are in the process of converging with IFRS.of converging with IFRS.

Canada will adopt IFRS on January Canada will adopt IFRS on January 1, 2011.1, 2011.

November 2007 - November 2007 - US Securities US Securities Exchange Commission decided to Exchange Commission decided to accept IFRS from foreign private accept IFRS from foreign private issuers and these issuers will no longer issuers and these issuers will no longer be required to reconcile their IFRS be required to reconcile their IFRS statements to US GAAP.statements to US GAAP.

January 2008January 2008, the Chartered , the Chartered Financial Analysts (“CFA”) announce Financial Analysts (“CFA”) announce that all real estate investments will that all real estate investments will require independent valuations every require independent valuations every three years and internal valuations with three years and internal valuations with disclosure of underlying assumptions disclosure of underlying assumptions will be reported quarterly;will be reported quarterly;

February 2008February 2008, the Canadian , the Canadian Accounting Standards Board (“AcSB”) Accounting Standards Board (“AcSB”) confirms IFRS will be adopted in confirms IFRS will be adopted in Canada effective January 1, 2011.Canada effective January 1, 2011.

February 2008February 2008, the Canadian , the Canadian Securities Administrators (“CSA”) Securities Administrators (“CSA”) issue a concept paper containing a issue a concept paper containing a tentative conclusion that financial tentative conclusion that financial statements may be prepared under statements may be prepared under IFRS for a financial year beginning on IFRS for a financial year beginning on or after January 1, 2009.or after January 1, 2009.

April 2008 – G7 Summit - Financial April 2008 – G7 Summit - Financial Stability ForumStability Forum

““International Standard setters should International Standard setters should enhance accounting, disclosure and audit enhance accounting, disclosure and audit guidance for valuation. Firm’s valuation guidance for valuation. Firm’s valuation processes and related supervisory processes and related supervisory guidance should be enhanced.”guidance should be enhanced.”

““The IASB will strengthen its standards The IASB will strengthen its standards to achieve better disclosures about to achieve better disclosures about valuations, methodologies and the valuations, methodologies and the uncertainty associated with valuations”uncertainty associated with valuations”

The International Accounting Standards The International Accounting Standards Board (“IASB” issues IFRS) is Board (“IASB” issues IFRS) is populating its Fair Value Measurement populating its Fair Value Measurement project which is not only attempting to project which is not only attempting to define what Fair Value is, but the basis define what Fair Value is, but the basis of measurementof measurement..

The US Financial Accounting Standards The US Financial Accounting Standards Board (“FASB”) issued Financial Board (“FASB”) issued Financial Accounting Statement 157 (“FAS 157”) Accounting Statement 157 (“FAS 157”) which permits assets and liabilities to which permits assets and liabilities to be measured at “Fair Value”.be measured at “Fair Value”.

Why IFRS?Why IFRS?

Paul CherryPaul Cherry, Chair of the Canadian , Chair of the Canadian Accounting Standards Board (“AcSB”)Accounting Standards Board (“AcSB”)

““Canada cannot stand in isolation Canada cannot stand in isolation from the growing acceptance of a from the growing acceptance of a common financial reporting language. common financial reporting language. Capital Markets have gone global and Capital Markets have gone global and Canada accounts for less than 4% of Canada accounts for less than 4% of the global capital markets”the global capital markets”

So when will it really hit So when will it really hit our desks?our desks?

Too late!Too late!

International ValuationInternational Valuation

StandardsStandards

International Valuation International Valuation Standards (Eight Edition)Standards (Eight Edition)

Introduction  Introduction  • • Background to the International Valuation Standards Background to the International Valuation Standards Committee and Committee and the Standards  the Standards  • • Concepts Fundamental to Generally Accepted Valuation Concepts Fundamental to Generally Accepted Valuation Principles Principles (“GAVP”)(“GAVP”)• Code of Conduct  • Code of Conduct  • Property Types• Property Types

  International Valuation StandardsInternational Valuation Standards• • IVS 1 Market Value Basis of ValuationIVS 1 Market Value Basis of Valuation• IVS 2 Bases Other Than Market Value• IVS 2 Bases Other Than Market Value• • IVS 3 Valuation ReportingIVS 3 Valuation Reporting

International Valuation ApplicationsInternational Valuation Applications• • IVA 1 Valuation for Financial ReportingIVA 1 Valuation for Financial Reporting• IVA 2 Valuation for Secured Lending Purposes• IVA 2 Valuation for Secured Lending Purposes• IVA 3 Valuation of Public Sector Assets for Financial • IVA 3 Valuation of Public Sector Assets for Financial ReportingReporting

International Valuation International Valuation Standards (Eight Edition)Standards (Eight Edition)

Guidance NotesGuidance Notes• • GN 1 Valuation of Real Property   GN 1 Valuation of Real Property   • GN 2 Valuation of Lease Interests   • GN 2 Valuation of Lease Interests   • GN 3 Valuation of Plant and Equipment • GN 3 Valuation of Plant and Equipment • GN 4 Valuation of Intangible Assets • GN 4 Valuation of Intangible Assets • GN 5 Valuation of Personal Property   • GN 5 Valuation of Personal Property   • GN 6 Business Valuation • GN 6 Business Valuation • GN 7 Consideration of Hazardous and Toxic Substances in • GN 7 Consideration of Hazardous and Toxic Substances in Valuation   Valuation   • GN 8 The Cost Approach for Financial Reporting-(“DRC”)• GN 8 The Cost Approach for Financial Reporting-(“DRC”)• GN 9 Discounted Cash Flow (“DCF”) Analysis for Market Valuations • GN 9 Discounted Cash Flow (“DCF”) Analysis for Market Valuations

and Investment Analyses and Investment Analyses• GN 10 Valuation of Agricultural Properties• GN 10 Valuation of Agricultural Properties• GN 11 Reviewing Valuations• GN 11 Reviewing Valuations• GN 12 Valuation of Specialised Trading Property• GN 12 Valuation of Specialised Trading Property• GN 13 Mass Appraisal for Property Taxation• GN 13 Mass Appraisal for Property Taxation• GN 14 Valuation of Properties in the Extractive Industries• GN 14 Valuation of Properties in the Extractive Industries• GN 15 Valuation of Historic Property• GN 15 Valuation of Historic PropertyGlossaryGlossaryIndexIndex

Professional ValuerProfessional Valuer

Professional Valuer:Professional Valuer: an individual who possesses intimate an individual who possesses intimate

knowledge of a property market; knowledge of a property market; understands the interaction of participants understands the interaction of participants in the market; and is, thereby, able to judge in the market; and is, thereby, able to judge the most likely prices to be concluded the most likely prices to be concluded between buyers and sellers of property in between buyers and sellers of property in that market.that market.

an individual who has appropriate an individual who has appropriate education, experience, is a member of a education, experience, is a member of a professional body and pursues professional professional body and pursues professional learning throughout his or her career.learning throughout his or her career.

If your clients are Publicly If your clients are Publicly Accountable Entities, (“PAE”) IFRS is Accountable Entities, (“PAE”) IFRS is mandatory. The boundaries of PAE mandatory. The boundaries of PAE are not yet finalized.are not yet finalized.

What IFRS will look like for Small and What IFRS will look like for Small and Medium sized Entities (“SME”) is also Medium sized Entities (“SME”) is also still to be determined.still to be determined.

Anyone, especially the development Anyone, especially the development community, wanting to maximize community, wanting to maximize value will likely opt to report Fair value will likely opt to report Fair Value under IFRS. Value under IFRS.

IVA 1 Valuation forIVA 1 Valuation forFinancial ReportingFinancial Reporting

IAS 16IAS 16 Property, Plant and EquipmentProperty, Plant and Equipment Initially recognized at CostInitially recognized at Cost After recognition, Revaluation at Fair Value After recognition, Revaluation at Fair Value

IAS 17IAS 17 LeasesLeases Operating LeasesOperating Leases Finance LeasesFinance Leases Sale / Lease backSale / Lease back

IAS 40IAS 40 Investment PropertyInvestment Property IAS 41IAS 41 Agricultural PropertyAgricultural Property

What should you be What should you be doingdoing

Don’t panic … there is time.Don’t panic … there is time. Keep monitoring. (AIC and UBC Keep monitoring. (AIC and UBC

websites)websites) IVS access is in the works with IFRS IVS access is in the works with IFRS

references.references. Big Four (plus) accounting firms have Big Four (plus) accounting firms have

lots of articles, planning around the lots of articles, planning around the transition to IFRS.transition to IFRS.

RealpacRealpac

Thank you for your attention.Thank you for your attention.

DisclaimerDisclaimer

Every effort has be made to ensure the Every effort has be made to ensure the statements and observations contained statements and observations contained in this presentation are correct. in this presentation are correct.

If you discover an error, I would If you discover an error, I would appreciate being advised of the error as appreciate being advised of the error as soon as possible by email at soon as possible by email at brad@bradford.cabrad@bradford.ca. Thank you.. Thank you.

Brad Wagar Brad Wagar 403-215-1050403-215-1050