IVS and IFRS: two standards, one number

A single fair value figure in a set of financial statements sits at the junction of two standard-setting traditions. IFRS 13 governs what the number must represent for financial reporting purposes; the International Valuation Standards (IVS) govern how a valuation is performed. Accountants who can place each standard in its proper role are better equipped to brief valuers, review their work and explain the result to those who rely on it.

A boundary drawn on purpose

The division of labour is not an accident of history but a documented agreement. In 2014 the IFRS Foundation and the IVSC signed a Statement of Protocols setting out their cooperation: IFRS 13 sets the principles for measuring fair value for financial reporting, the IVSC maintains standards on how valuations are performed, and each body retains sole responsibility for its own standards. The point bears repeating precisely because it is often blurred in practice: IFRS 13 does not adopt IVS, and IVS do not determine accounting treatment. The IVSC’s announcement of the protocol frames the arrangement as cooperation between complementary regimes, not a merger of them.

Who does what

Confusion usually arises when one framework is asked a question that belongs to the other. The split is easier to hold onto as a set of questions and owners.

The shape of IVS

The IVS are organised in two tiers. The General Standards — IVS 100 Valuation Framework, IVS 101 Scope of Work, IVS 102 Bases of Value, IVS 103 Valuation Approaches, IVS 104 Data and Inputs, IVS 105 Valuation Models and IVS 106 Documentation and Reporting — apply across engagements. The Asset Standards then add requirements for particular asset classes, from IVS 200 Businesses and Business Interests through to IVS 500 Financial Instruments. For an accountant reviewing a valuation report, the General Standards are the more useful map: they describe the sequence of decisions the standards expect to be documented, in the order the engagement unfolds.

Why the distinction helps in practice

Knowing where the line sits pays off at three moments. When briefing a valuer, it lets the accountant state the reporting requirement clearly while leaving the conduct of the valuation to the standards written for that purpose. When reviewing a report, it directs attention to the right document: the measurement objective is tested against the accounting framework, the process against the valuation one. And when explaining a figure to an audit committee or auditor, it allows the preparer to show that two independent disciplines, each with its own standard-setter, stand behind a single number. With IVS used as a framework in more than 100 countries, that second discipline travels well — a useful property when group reporting crosses borders and the same fair value must be explained in more than one place.