Circular No. 158/2014/TT-BTC promulgates Vietnamese Appraisal Standards No. 01, 02, 03, and 04.

 

CIRCULAR

Issuing Vietnam Appraisal Standards No. 01, 02, 03, and 04

Pursuant to the Law on Prices No. 11/2012/QH13 dated June 20, 2012;

Pursuant to Decree No. 89/2013/NĐ-CP dated August 6, 2013 of the Government detailing the implementation of certain provisions of the Law on Prices regarding appraisal;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013, promulgated by the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director of the Price Management Department,

The Minister of Finance issues this Circular on issuing Vietnam Appraisal Standards No. 01, 02, 03, and 04.

Article 1. Accompanying this Circular are four Vietnam Appraisal Standards with the following numbers and names:

- Vietnam Appraisal Standard No. 01 – Ethical Rules for Appraisers;

- Vietnam Appraisal Standard No. 02 – Market Value as Basis for Appraisal;

- Vietnam Appraisal Standard No. 03 – Non-Market Value as Basis for Appraisal;

- Vietnam Appraisal Standard No. 04 – Economic Principles Governing Appraisal Activities.

Article 2. Effectiveness

1. This Circular takes effect from January 1, 2015.

2. The Vietnam Appraisal Standards include: Standard No. 01 – Market Value as Basis for Asset Appraisal, Standard No. 03 – Ethical Rules for Asset Appraisal Practitioners issued together with Decision No. 24/2005/QD-BTC dated April 18, 2005 on issuing three Vietnam Appraisal Standards; Standard No. 02 – Non-Market Value as Basis for Asset Appraisal, and Standard No. 06 – Economic Principles Governing Asset Appraisal Activities issued together with Decision No. 77/2005/QD-BTC dated November 1, 2005 of the Minister of Finance on issuing three Vietnam Appraisal Standards (second batch) shall cease to be effective from the date this Circular takes effect.

Article 3. Implementation

1. The Price Management Department shall take the lead and coordinate with relevant agencies to direct, guide, and inspect the implementation of the provisions of the Vietnam Appraisal Standards issued together with this Circular and related legal documents.

2. In case of difficulties during implementation, units are requested to report to the Ministry of Finance for guidance on resolution and appropriate amendments and supplements./.

 

 

SYSTEM OF VIETNAM APPRAISAL STANDARDS

Vietnam Appraisal Standard No. 01

Ethical Rules for Appraisers

(Code: TĐGVN 01)

(Issued together with Circular No. 158/2014/TT-BTC dated October 27

2014 of the Minister of Finance)

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of Application: This standard regulates ethical rules governing appraisers and appraisal firms during their practice.

2. Applicability: This standard applies to practicing appraisers (hereinafter referred to as appraisers), appraisal firms, and other organizations and individuals engaged in appraisal activities according to the Law on Prices and other relevant laws.

3. Clients and third parties using the results of the appraisal must have necessary knowledge about the rules stipulated in this standard.

II. CONTENT OF THE STANDARD

1. Appraisers and appraisal firms must respect and comply strictly with the provisions of the Law on Prices, guiding documents, and other relevant laws during their appraisal practice.

Appraisers must be persons of good moral character, honest, impartial, and objective when conducting appraisals, meeting the standards of appraisers stipulated in the Law on Prices and guiding documents.

2. Appraisers signing the report on the results of the appraisal and the appraisal certificate must bear legal responsibility before the law, the legal representative, General Director, or Director of the appraisal firm regarding the results of the appraisal.

The legal representative, General Director, or Director of the appraisal firm bears ultimate responsibility for the accuracy, honesty, and objectivity of the appraisal results before the law, clients, and third parties determined by the client and agreed upon by the appraisal firm in the appraisal contract.

3. Ethical standards and professional qualifications of appraisers include:

a) Independence;

b) Integrity;

c) Objectivity;

d) Confidentiality;

đ) Transparency and openness;

e) Professional competence and prudence;

g) Professional standing;

h) Compliance with professional standards.

4. Independence

- Independence is a fundamental principle of practice for appraisal firms and appraisers.

- During the appraisal process, appraisers and appraisal firms must ensure independence in professional matters, truly not being influenced or affected by any material or spiritual interests that may affect the honesty and objectivity of the appraisal activity and the appraisal results.

- Appraisers and appraisal firms shall not undertake appraisals in cases prohibited by the Law on Prices and guiding documents. During the appraisal process, if there are limitations on independence, appraisers and appraisal firms must find ways to overcome these limitations. If they cannot be overcome, appraisers and appraisal firms must clearly state these limitations in the Report on the Results of the Appraisal or refuse to conduct the appraisal.

- When reviewing another appraiser's report on the results of the appraisal, the appraiser must make independent and objective observations and conclude whether they agree or disagree with part or all of the contents of the report.

5. Integrity

- Appraisers must be frank, honest, and have clear opinions when conducting appraisals.

- Appraisers must be truthful about their qualifications, experience, and professional competence; they must ensure that themselves and their assistants and subordinates comply strictly with the laws and the system of Vietnam Appraisal Standards when conducting appraisals.

- Appraisers must refuse to conduct appraisals if they consider that they do not have sufficient conditions to conduct appraisals or if they are influenced by constraints that may distort the appraisal results.

6. Objectivity

- Appraisers must be fair, respect the truth, and not be prejudiced or biased in collecting and using information for analysis of factors affecting the appraisal.

- Appraisers and appraisal enterprises shall not conduct appraisal work when the opinions, conclusions, and results of the appraisal have been predetermined.

- Appraisers and appraisal enterprises must verify the information and data provided by the client to confirm their suitability or unsuitability. In cases where the verification of such information and data is limited, the appraiser must clearly state these limitations in the appraisal report and the appraisal certificate.

- Appraisers and appraisal enterprises shall not base their appraisals on hypothetical conditions without rigorous, feasible, and credible arguments.

7. Confidentiality

- Appraisers and appraisal enterprises shall not disclose information about the appraisal file, the appraising client, and the appraised asset without the consent of the appraising client or without permission from the law. Such information includes non-publicly disclosed details related to the client and the appraised asset provided by the client or collected by the appraisal enterprise during the appraisal process.

- Appraisers and appraisal enterprises are responsible for requiring other individuals involved in the appraisal process and those storing the appraisal files to respect confidentiality principles.

8. Transparency and Openness

- All documents reflecting the legal status and technical characteristics of the asset and the appraisal results must be fully and clearly presented in the appraisal result report.

- The appraisal result report must clearly state the conditions governing the work, the scope of work, the limiting conditions, and the assumptions made by the appraiser.

- Appraisers and appraisal enterprises must disclose the limiting conditions and remedial conditions agreed upon with the client in the appraisal result report.

- The service fee for the appraisal service is implemented based on the agreement between the appraisal enterprise and the appraising client, based on the grounds stipulated by the Price Law and guiding documents, and recorded in the appraisal service contract; in the case of tendering for appraisal services, it shall be carried out according to the provisions of the law on bidding for consulting service packages. The appraisal enterprise shall issue and publicly display the price list for appraisal services.

9. Professional Competence and Prudence

- Appraisers must perform appraisal work with the necessary professional competence, diligent work ethic, prudence, and thorough consideration of all collected data before officially proposing opinions to the General Director or Director of the appraisal enterprise.

- Appraisers must continuously enhance their knowledge and professional skills as well as practical experience in a legal environment. Annually, appraisers are obligated to participate in professional training organized by authorized agencies or organizations.

- Appraisal enterprises have the responsibility to encourage, arrange, and create conditions for appraisers to participate in professional training and skill development as prescribed, while applying technological advancements to ensure that appraisers meet the requirements of appraisal work and provide the best appraisal services to clients.

- Appraisal enterprises need to implement measures to ensure that professionals working at the enterprise are appropriately trained, developed, and supervised.

- Appraisal enterprises have the responsibility to purchase professional liability insurance for appraisal activities or establish a risk reserve fund for appraisal professional risks.

10. Professional Standing

- Appraisal enterprises and appraisers must cultivate and protect the professional reputation, and shall not engage in behaviors that diminish the professional reputation of appraisers, such as poaching clients through obstruction, threats, inducements, bribery, and other unfair competitive practices.

- Appraisal enterprises and appraisers have the right to join domestic and international professional organizations in accordance with the law.

11. Compliance with Professional Standards

- Appraisers and appraisal enterprises must carry out appraisal work in accordance with the techniques and professional standards specified in the Vietnamese Appraisal Standards system and other relevant current laws.

- Appraisers and appraisal enterprises have the right to hire organizations or individuals who meet the conditions stipulated by current laws to provide consultation and issue professional conclusions to support appraisal activities.

12. The contents of the ethical rules for property appraisal practice set forth in this Standard must be specifically embodied and reflected in the process of developing procedures and implementing quality control of appraisal activities of appraisal enterprises.

 

SYSTEM OF VIETNAM APPRAISAL STANDARDS

Vietnamese Appraisal Standard No. 02

Market Value Basis for Appraisal

(Code: TĐGVN 02)

(Issued together with Circular No. 158/2014/TT-BTC dated October 27

2014 of the Minister of Finance)

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of Application: This standard specifies the market value of assets and the application of market value when conducting asset appraisals.

2. Applicability: Appraisers practicing valuation (hereinafter referred to as appraisers), appraisal enterprises, and other organizations and individuals conducting appraisal activities in accordance with the Price Law and other relevant laws.

II. CONTENT OF THE STANDARD

1. The basis for asset value can be either a market value basis or a non-market value basis. The value of the asset estimated on the basis of market value is the market value and is determined by the approaches specified in the Vietnamese Appraisal Standards system.

2. Market value is the estimated price of the asset at the time and location of the valuation, between one party willing to buy and another party willing to sell, in an objective, independent transaction with sufficient information, where the parties act with knowledge, caution, and without coercion. In which:

a) The time and location of the valuation are specific time and space corresponding to the time and space when the market value of the asset being valued is determined by the appraiser, linked to supply and demand factors, market trends, and purchasing power on the market.

b) A willing buyer is a person with the ability to pay and a need to purchase the asset at the best possible price on the market.

c) A willing seller is a person with legal ownership of the asset and a need to sell the asset at the best possible price on the market.

d) An objective, independent transaction with sufficient information is a transaction between parties without special relationships that affect the transaction price of the asset, and the parties have sufficient time to survey and fully access information about the asset and the asset market after an appropriate marketing process.

Special relationships affecting the transaction price of the asset include:

- Blood family relationships: father, mother, wife, husband, children, brothers, sisters;

- Direct family relationships: wife, husband, and people in the relationship of father, mother, children, brothers, sisters, and others economically dependent;

- Corporate network relationships: organizations under the control, ownership, or joint management of a company or any organization that a third party can easily conclude is part of the company within the national or international scope, such as parent companies, subsidiaries, branches, representative offices;

- Other special relationships as prescribed by relevant laws.

e) Acting with knowledge, caution, and without coercion means that when participating in the transaction, both parties have civil capacity, carefully consider all opportunities and the best choices for themselves based on market information before making a completely voluntary decision to buy or sell, not excessively eager to buy or sell, and not subjected to any pressure to sell or buy to achieve the most suitable price for both parties.

3. Market value reflects the price formed in a public and competitive market. This market may be a domestic or international market, including many buyers and sellers or a limited number of buyers and sellers.

4. In cases where there are limitations in determining the market value of the asset (market information, data, valuation conditions, or other restrictions), the appraiser clearly states the reasons, corrective measures (if any), and the extent of impact on the valuation result due to this limitation in the valuation report.

 

SYSTEM OF VIETNAM APPRAISAL STANDARDS

Vietnam Valuation Standard No. 03

Non-market value as the basis for valuation

(Code: TĐGVN 03)

(Issued together with Circular No. 158/2014/TT-BTC dated November 27

2014 of the Minister of Finance)

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of application: This standard stipulates the non-market value of assets and the application of non-market value when conducting valuations.

2. Applicability: Appraisers practicing valuation (hereinafter referred to as appraisers), appraisal enterprises, and other organizations and individuals conducting appraisal activities in accordance with the Price Law and other relevant laws.

II. CONTENT OF THE STANDARD

1. The basis for asset value can be either a market value basis or a non-market value basis. The asset value estimated on the basis of non-market value is a non-market value and is determined according to the approaches specified in the Vietnam Valuation Standards system.

2. Non-market value is the estimated price of an asset at the time and location of the valuation, not reflecting market value but based on economic-technical characteristics, functions, uses of the asset, benefits derived from its use, value to certain special buyers, value in transactions under restricted conditions, value for certain special valuation purposes, and other values not reflecting market value. Non-market value includes: forced sale value, special value, investment value, tax calculation value, and other values, specifically:

a) Forced sale value is the total amount received from selling the asset under conditions where the transaction time for selling the asset is shorter than the normal time required to complete a market value transaction, the seller is not ready to sell or sell voluntarily. Prices in such asset sales are called forced sale value, which does not reflect market value.

b) Special value is the value of an asset with unique characteristics that only attract the interest of certain special buyers or users. Special value can be formed due to the asset's location, nature, economic-technical characteristics, legal factors, and other special factors. Special value includes: in-use asset value, limited market asset value, specialized asset value, and other special values.

In-use asset value is a non-market value considered from the perspective of a single user using the asset for a specific purpose, thus unrelated to the market. When conducting the valuation of this type of asset, the appraiser focuses mainly on the aspect of the asset's participation and contribution to the operation of a production chain, a business, or another asset, without considering the optimal use value or the amount of money that could be obtained from selling the asset on the market.

Limited market asset value is the value of an asset due to its uniqueness, or market conditions, or other factors affecting the asset's limited customer base at a particular point in time. The important distinguishing feature of this asset is not that it cannot be sold on the open market, but rather that selling it requires a longer marketing process, more costs, and time compared to other assets.

c) Investment value is the value of an asset to an investor based on predetermined investment objectives.

Investment value is a subjective concept related to specific assets for a particular investor with defined investment goals and/or criteria. The difference between investment value and market value of an asset drives investors to participate in the market.

d) Tax assessment value is the value based on legal provisions concerning the valuation of assets for tax calculation purposes.

3. When applying non-market value bases, the appraiser must specify the name of the specific non-market value type being applied and provide concrete grounds and arguments, including:

- Special characteristics of the asset being appraised;

- Special buyer, investor;

- Transactions in restricted markets, compulsory sales;

- Values according to special purposes such as tax calculation purposes.

 

SYSTEM OF VIETNAM APPRAISAL STANDARDS

Vietnam Appraisal Standard No. 04

Economic Principles Governing Appraisal Activities

(Code: TĐGVN 04)

(Issued together with Circular No. 158/2014/TT-BTC dated October 27

2014 of the Minister of Finance)

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of Application: This standard stipulates principles for determining the value of assets and guides principles when conducting appraisals.

2. Applicability: Appraisers practicing valuation (hereinafter referred to as appraisers), appraisal enterprises, and other organizations and individuals conducting appraisal activities in accordance with the Price Law and other relevant laws.

II. CONTENT OF THE STANDARD

The value of an asset is formed by the influence of many factors such as utility value, scarcity, and demand with payment capacity. When conducting an appraisal, the appraiser needs to study and apply the following basic principles to analyze and evaluate the factors affecting the formation of asset value, thereby concluding on the value of the asset.

1. Best and Most Productive Use Principle

The best and most productive use of an asset is achieving the maximum usefulness legally, technically, and financially possible under actual socio-economic conditions, thereby generating the highest value for the asset.

An asset currently in use does not necessarily reflect its best and most productive use.

2. Supply and Demand Principle

The value of an asset is determined by the supply and demand relationship for that asset in the market. Simultaneously, the value of the asset also affects its supply and demand. The value of an asset changes proportionally with demand and inversely with supply. Physical characteristics and other socio-economic attributes differentiating from those of other assets are reflected in supply and demand and asset value.

3. Change Principle

The value of an asset changes with the alteration of factors forming and influencing its value.

The value of an asset is also formed during a continuous process reflecting a series of cause-and-effect relationships among influencing factors. Influencing factors themselves are always changing. Therefore, in asset appraisal, the appraiser must grasp the cause-and-effect relationships among factors in a dynamic state, analyze the change process to determine the best and most productive use of the asset.

4. Substitution Principle

In cases where two or more assets can substitute each other in use, their values are determined by the mutual impact of these assets.

When two assets have equal utility, the one offered at the lowest price will be sold first. The upper limit of the asset's value tends to be set by the cost of purchasing a necessary equivalent substitute asset, provided there is no excessive delay affecting substitution. A prudent buyer will not pay more than the cost of purchasing a substitute asset in the same market and time period.

5. Balance Principle

When the components of an asset achieve balance, the asset achieves maximum profitability or highest usefulness. Therefore, to estimate the best and most productive use of the asset, it is necessary to analyze the balance of the components of the asset being appraised.

6. Increasing or Decreasing Income Principle

Total income from an investment increases continuously up to a certain point, after which, although investment continues to increase, additional income will gradually decrease.

7. Income Distribution Principle

Total income generated from the combination of production factors (land, capital, labor, management) can be distributed to each factor. If distribution is carried out according to the corresponding principle, the remaining total income after distributing to capital, labor, and management will represent the value of land.

8. Contribution Principle

The degree to which each part of an asset contributes to the total income from the entire asset affects the total value of that asset.

The value of a production factor or component of an asset depends on how much the absence of that factor reduces the overall asset value, meaning the amount of value it contributes to the overall value. When assessing the value of a partial asset, the appraiser must consider it in relation to the overall asset.

This principle is fundamental in considering the feasibility of additional investment in the asset when the appraiser determines the best and most productive use of the asset.

9. Suitability Principle

The asset must be suitable for its environment to achieve maximum profitability or highest usefulness. Therefore, the appraiser must analyze whether the asset is suitable for its environment when determining the best and most productive use of the asset.

10. Competition Principle

Excessively high profits will promote competition, while excessive competition may reduce profits and ultimately eliminate them. For assets, competitive relationships are observed among assets and between assets. When conducting an appraisal, the appraiser must consider and evaluate the impact of the competition factor on the income of the asset, especially when using the income approach to determine the asset's value.

11. Principle of Anticipating Future Benefits

The value of the asset may be determined by estimating its future earning capacity.

The value of the asset is also influenced by the anticipated market share of market participants, and changes that can be predicted in this factor will also affect the value.

Estimating the value of the asset always relies on future prospects and the expected benefits derived from the buyer's use of the asset./.