ORDER
OF THE MINISTER OF FINANCE OF THE REPUBLIC OF LITHUANIA
REGARDING THE APPROVAL OF PROPERTY AND BUSINESS VALUATION METHODOLOGY
27 April 2012 No 1K-159
Vilnius
Following Article 2.15 of the Law on Bases of Property and Business Valuation of the Republic of Lithuania (Official Gazette Valstybės Žinios, 1999, No52-1672; 2011, No86-4139) and paragraph 2.1 of Resolution No 1389 Regarding the Assignment of Powers to Enforce the Law on Bases of Property and Business Valuation of the Republic of Lithuania from the government of the Republic of Lithuania dated 13 December 1999 (Official Gazette Valstybės Žinios, 1999, No106-3081; 2012, No47-2301):
1. I hereby approve the Property and Business Valuation Methodology (as enclosed).
2. This Law will become effective as of 1 May 2012.
Ingrida Šimonytė
MINISTER OF FINANCE
______
APPROVED
by order No 1K-159 from the
minister of finance of the Republic of Lithuania dated 27 April 2012
PROPERTY AND BUSINESS VALUATION METHODOLOGY
I. GENERAL PROVISIONS
1. The Property and Business Valuation Methodology (“the Methodology”) shall regulate the following:
1.1. the purposes of property or business valuation (“valuation”);
1.2. the procedure of valuation;
1.3. the approaches of property valuation and application thereof;
1.4. the approaches of business valuation and application thereof.
2. For the purposes of this Methodology, the following terms and phrases shall have the following meanings:
International Valuation Standards are the document drafted and approved by the International Valuation Standards Council establishing the requirements of property and business valuation approaches.
European Valuation Standards are the document drafted and approved by the European Group of Valuers’ Associations establishing the requirements of property and business valuation approaches.
Retrospective valuation is a valuation to determine the historical value of property or business.
Other terms used for the purposes of this Methodology shall be construed in the way they are defined in the Law on Bases of Property and Business Valuation of the Republic of Lithuania (Official Gazette Valstybės Žinios, 1999, No52-1672; 2011, No86-4139), the International Valuation Standards, the European Valuation Standards, and other legislation.
3. Fields of valuation:
3.1. real estate valuation including:
3.1.1. real estate;
3.1.2. intangible assets – rights to intangible assets;
3.2. movable property valuation including:
3.2.1. movable property;
3.2.2. intangible assets – rights to intangible assets;
3.3. business valuation including:
3.3.1. business;
3.3.2. intangible assets;
3.3.3. financial assets;
3.3.4. financial liabilities.
4. While conducting business, the property or business appraiser (“the appraiser”) shall adhere to the Law on Bases of Property and Business Valuation of the Republic of Lithuania, the International Business Standards and the European Business Standards, legislation regulating compulsory valuation, the Code of Professional Ethics of Property or Business Appraisers, the present Methodology and other items of legislation relating to valuation to the extent they do not contradict the Law on Bases of Property and Business Valuation of the Republic of Lithuania, the International Business Standards, the European Valuation Standards, and the present Methodology.
5. While conducting valuation, the appraiser shall rely on the logic of market and economy, and criteria based on the results of observations and studies of market and economy conditions.
6. While conducting valuation, the appraiser shall have the right to hire other specialists. Information about other specialists hired for the purposes of valuation shall be specified in the valuation report, stating the specialists that provided the information that the appraiser relied upon.
7. The rights, duties, and responsibilities of the appraiser shall be laid down in the Law on Bases of Property and Business Valuation of the Republic of Lithuania, the valuation contract over valuation services (“the valuation contract”) to the extent it does not contradict said law, and the terms of reference (when terms or reference are drawn in line with the Law on Bases of Property and Business Valuation of the Republic of Lithuania and do not contradict that law).
II. PURPOSES OF VALUATION
I. GENERAL PROVISIONS
8. Valuation shall be done for the following purposes:
8.1. financial reporting;
8.2. taxation;
8.3. insurance, claim assessment;
8.4. collateral;
8.5. transfer of ownership;
8.6. other purposes.
II. VALUATION FOR THE PURPOSES OF FINANCIAL REPORTING
9. Valuation for financial reporting purposes shall be done in the following cases:
9.1. compulsory valuation;
9.2. as per client’s request.
10. When it comes to valuation for financial reporting purposes, in addition to the legislation spelled out in paragraph 4 of this Methodology, the appraiser shall also follow the International Accounting Standards, the Business Accounting Standards or the Public Sector Accounting and Financial Reporting Standards.
11. For valuations carried out for the purposes of drafting financial statements in line with the International Accounting Standards, the European Valuation Standards shall apply to the extent they do not contradict the International Valuation Standards.
12. Valuation for the purposes of financial reporting shall determine:
12.1. the market value through individual valuation;
12.2. the fair value through individual valuation;
12.3. other values spelled out in the International Valuation Standards, the European Valuation Standards, the legislation or relevant accounting standards through individual valuation.
III. VALUATION FOR THE PURPOSES OF TAXATION
13. Valuation for taxation purposes shall be done in the following cases:
13.1compulsory valuation;
13.2. as per client’s request.
14. Valuation for the purposes of taxation shall determine:
14.1. the tax (average market) value through individual valuation;
14.2. the market value through individual valuation;
14.3. other values spelled out in the International Valuation Standards, the European Valuation Standards, the legislation or relevant accounting standards through individual valuation.
IV. VALUATION FOR THE PURPOSES OF INSURANCE, CLAIM ASSESSMENT
15. Valuation for insurance, claim assessment purposes shall be done in the following cases:
15.1. compulsory valuation;
15.2. as per client’s request.
16. Valuation for the purposes of insurance, claim assessment shall determine:
16.1. the market value through individual valuation;
16.2. replacement value of the property through individual valuation;
16.3. other values spelled out in the International Valuation Standards, the European Valuation Standards, the legislation or relevant accounting standards through individual valuation.
V. VALUATION FOR THE PURPOSES OF COLLATERAL
17. Insurance for collateral purposes shall be done as per client’s request.
18. When engaging in valuation for collateral purposes, the appraiser shall express an opinion on whether the subject property constitutes a complete whole. If the property does not constitute a complete whole (a set), the appraiser then shall have to specify if the property was appraised considering that it, as a part of a set, would be sold together with the other elements constituting a complete whole (as a set in aggregate), or if the property would be sold separately from the elements constituting a complete whole (a set).
19. Valuation for collateral purposes shall be based on the current intended function and use of property. Alternative use of property may constitute the basis for valuation only with the following valid documents present: summary terms of design, a draft detailed project, an approved detailed plan, or a construction permit.
20. When appraising movable property for collateral purposes, the appraiser shall indicate in the property valuation report if the movable property was being appraised considering that it would be relocated, or not, meaning that it would remain at its current location.
21. Valuation for the purposes of collateral shall determine:
21.1. the market value through individual valuation;
21.2. other values spelled out in the International Valuation Standards, the European Valuation Standards through individual valuation.
VI. VALUATION FOR THE PURPOSES OF CESSION TRANSFER OF OWNERSHIP
22. Valuation for the purposes of transfer of ownership shall be done in the following cases:
22.1. compulsory valuation;
22.2. as per client’s request.
23. While determining the value of securities, the appraiser shall, in the case of compulsory official bid and compulsory sale and purchase of shares:
23.1. appraise the entire (100 per cent) stock and, based on its value, determine the value of one share;
23.2. consider factors such as the price of the securities on a regulated market, the amount if dividends payable to the shareholders, and other elements affecting the value of the shares of the subject company;
23.3. record the factors specified in paragraph 23.2 of this Methodology for the date of the valuation of shares. If they cannot be identified for that date, the factors shall be identified for the date that is possibly the nearest to the shares valuation ate;
23.4. make use of audited financial statements. If, at the time of valuation, the release of audited annual financial statements was followed by a publication of interim financial statements (covering a period of 3, 6, 9or 12months), when performing the valuation, the appraiser shall rely on the audited annual financial statements, but shall take account of the contents of the relevant financial statements of the last interim reporting period (such as income, net result, and so on), and their effect on the value of the shares as well.
24. When determining the value of securities in the case of a compulsory official bid and a compulsory sale and purchase of shares, the methods laid down in Chapter V of this Methodology shall apply:
24.1. when the value of shares is being determined using a combination of asset approaches, the property shall be reflected at fair value (as defined in the International Accounting Standards or the Business Accounting Standards) rather than cost;
24.2. when the value of shares is being determined using a combination of asset approaches, audited financial statements shall be used, complete with an underlying unconditional opinion from the auditor without emphasis of matter paragraphs. If the auditor has expressed a modified audit opinion regarding the financial statements, especially for as much as it concerns incorrect and/or unreasonable reflection of the fair value of property or if there are reasons to suspect that the value was reflected in the financial statements incorrectly and/or unreasonably, the established value may not be considered the fair value.
25. The opinion on the value of shares shall, in the case of a compulsory official bid and a compulsory sale and purchase of shares, be reflected in the valuation report using only one approach, providing reasoning why the value of shares derived on the basis of that approach provides the most objective reflection of the value of shares determined for the purpose of the valuation.
26. Valuation for the purposes of transfer of ownership shall determine:
26.1. the market value through individual valuation;
26.2. other values spelled out in the International Valuation Standards, the European Valuation Standards through individual valuation.
III. VALUATION PROCEDURE
I. GENERAL PROVISIONS
27. Valuation shall be undertaken upon receipt of the valuation client’s (“the client”) request to determine the value of property or business and upon the valuation company or the independent appraiser and the client entering into a written valuation contract, to which, by agreement of the parties, terms of reference may be attached in line with the requirements of the Law on Bases of Property and Business Valuation of the Republic of Lithuania. For the purposes of internal valuations, no valuation contract shall be drawn, however in that case drafting terms of reference shall be mandatory.
28. While conducting valuation, the appraiser shall consider the field and purpose of valuation and shall collect the following data:
28.1. the economic and social indicators of the subject property or business;
28.2. the market situation around and the terms of finance of the subject property or business;
28.3. the legal regime (ownership right, other tangible rights, legal facts, special usage rights attached, and so on) of the subject property or business;
28.4. the possibilities to develop and/or alternative use of the property or business.
29. In the process of conducting valuation, the appraiser shall use information that has been presented to them and/or is available to the public, which information shall reflect the satiation prior to and at the time of valuation.
30. The appraiser shall specify the sources of data gathered and used in the valuation report.
II. DETERMINING THE EXISTENCE OF property or business
31. When engaging in valuation, the appraiser shall establish that the subject property or business exists (or existed) by:
31.1. performing an inspection of the subject tangible assets (“the subject property”) with the exception of cases spelled out in paragraph 44 of this Methodology;
31.2. gathering documents or copies of documents supporting the fact that the subject property or business exists;
31.3. gathering information about the size of the authorised capital, nominal value of shares, number of shares, number of shareholders, subject stock, and holders of the shares in the subject stock (such as the name and legal form of an entity, or the full name of a private individual) for the purposes of business valuations.
32. Before conducting an inspection of the subject property, the appraiser shall notify the client of the date and time of the inspection. The client (unless the client is the owner of the subject property) shall notify the owner of the property of the scheduled inspection of the property.
33. The survey of the subject property may be performed by an appraiser who is qualified as an expert appraiser, appraiser, or assistant appraiser.
34. The appraiser shall conduct the inspection in the presence of the owner and/or the client or their authorised representatives, with the exception of cases specified in paragraph 39 of this Methodology.
35. The inspection shall involve the photographing and/or filming of the subject property in line with the following requirements:
35.1. the photographs and/or video material shall register the individual characteristics of the subject property affecting its value, which could be used to identify the subject property;
35.2. there shall be at least 3 photographs made of the subject property, and at least one copy of video material;
35.3. the photographs and/or video material shall show the interior and exterior of the subject property, if the subject property has an interior and exterior;
35.4. the photographs and/or video material shall be in colour and definition to enable recognition of the subject property or its individual fragments;
35.5. the subject property shall be photographer and/or filmed by the appraiser on the date of the inspection.