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Message from B. Kanaga sabapathy

24.12.2019

Dear fellow valuers,

1. A fellow valuer has forwarded the enclosed 96 multiple choice questions

related to International Valuation Standards - 2020 and requested me to
furnish the right choice.

2. With the little knowledge I have developed in the topic of International valuation
standards, I have suggested the appropriate choice.

3. I take this opportunity to thank my fellow faculty member Mr. R. Jayaraman

who came forward to assist me in choosing the most opt answer.

4. I may be corrected if I am wrong.

With best wishes,

(B. Kanaga sabapathy)

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INTERNATIONAL VALUATION STANDARDS - 2020

Multiple Choice Questions

- Provided by Mr. B. Kanaga sabapathy

Tiruchirappalli

1. What is the IVS for scope of work

a. IVS 100 b. IVS 101

c. IVS 200 d. IVS 400

2. Scope of work can be written or oral

a. True b. False

3. Which does not come under the spectrum of valuation under IVS

a. In-House Valuations b. Third Party Valuations

c. Valuation reviews d. Sentimental Valuations

4. Whether scope of work can be changed during the course of valuation assignment

a. True b. False

5. Valuation work undertaken ....................... be appropriate for the intended purpose

a. Should b. May
c. Must

6. What is not the date relevant in a valuation report

a. Valuation date b. Date of inspection

c Date on which report is signed d. Date on which report is used

7. Scope of work describes

a. Contract between valuer & client for a specified value

b. Terms of engagement
c. Responsibility of client only
d. Responsibility of valuer only
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Investigations & Compliance

8. What is IVS for investigations & compliance

a. IVS 107 b. IVS 108

c. IVS 102 d. IVS 400

9. There can be limits for Investigations for assets for valuation :

a. True b. False

10. Investigations does not include

a. Assembly of evidence b. Inquiry

c. Valuation d. Computation & Analysis

11. Who has to provide / collect supporting documents / information for a valuation

a. Client b. Valuer
c. Revenue officials d. Both client & valuer

12. For assuring credibility & reliability of information, provided, valuers which of the
following is not a consideration

a. Purpose of valuation
b. Significance of information to the valuation conclusion
c Expertise of the source In relation to the subject matter
d. Loan amount

13. As per IVS, Valuation Record must kept for a period of

a. 3 years b. Period specified by client

c. Reasonable Period d. Period for the purpose of valuation
is completed

14. If a valuation requires a statutory / legal requirements to be followed, the valuation

cannot be called IVS compliant

a. True b. False
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15. If valuation requires statutory / legal requirements to be followed, then such

requirements are called a

a. Deviation from IVS b. Departure

c. Companies Act compliant d. RVO Valuation standard compliant

16. You can still do the valuation if the work will not result in a credible valuation or
information provided is insufficient

a. True b. False

Reporting

17. What is IVS for Reporting

a. IVS 103 b IVS 101

c. IVS 108 d. IVS 300

18. One of the following is not a content of the report

a. Clear & accurate description of the scope

b. Purpose of valuation
c. Value as required by the client
d. Intended use & disclosures

19. IVS 103 applies to

a, All valuation reports

b. Those which are claimed as IVS compliant
c. Those which are issued under Section 34 AB of Wealth Tax Act
d. Valuation reports prepared for courts

20. There is a format for IVS compliant Reports

a. True b. False

21. Reports need not contain one of the following :

a. Scope of work b. Key inputs used

c. Site notes d. Assumptions made
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Bases of Value

22. The IVS standard for Bases of Value is

a. IVS 104 b. IVS 105

c. IVS 106 d. IVS 107

23. Fair Market Value is a defined base in IVS

a. True b. False

24. Bases of value also sometimes referred as

a. Value of property b. Guideline value

c. Standard of value d. Value of use

25. Basis of value ............ influence or dictate a valuer’s selection of methods, inputs and
assumptions, and the ultimate opinion of value.

a. May b. Must
c. Will d. Shall

26. A valuer may be required to use bases of value that are defined by

a. Statute b. Regulation
c. Private contract d. All of above

27. A valuer may be required to use ............. of value that are defined by statute, regulation,
private contract or other document as per IVS 104.

a. Bases b. Standard
c. Premise d. Documentary proof

28. Depending on the basis of value, the assumed transaction could take a number of
forms;

a. a hypothetical transaction b. an actual transaction

c. a purchase (or entry) transaction d. All of above
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29. The assumed date of a ........... will influence what information and data a valuer consider
in a valuation.

a. Valuation b. Transaction
c. Inspection d. Work order

30. IVS - defined bases of value does not include :

a. Market value b. Market rent

c. Equitable value d. Guideline value / Circle value

31. Valuers must choose the relevant basis (or bases) of value according to the ............
and .............. of the valuation assignment.

a. Method, Standard b. Location, Payment

c. Terms, Purpose d. Purpose, Method

32. Valuers ............... choose the relevant basis (or bases) of value according to the terms
and purpose of the valuation assignment.

a. must b. may
c. should d. can

33. Valuers are ........... for understanding the regulation, case law and other interpretive
guidance related to all bases of value used

a. not responsible b. responsible

c. obliged d. mandatorily responsible

34. An arm’s length transaction is one ................ parties who do not have a particular or
special relationship

a. between b. among
c. across d. along

35. The concept of market value .............. a price .............. in an open and competitive
market where the participants are acting freely

a. presumes; negotiated b. assumes; agreed

c. estimates; labeled d. does not assume; not agreed
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36. The nature and source of the valuation inputs ............... be consistent with the basis of
value, which in turn ............... have regard to the valuation purpose.

a. may; may b. should; should

c. could; could d. must; must

37. The data available and the circumstances relating to the market for the asset being
valued .............. determine which valuation method or methods are most relevant and
appropriate

a. may b. must
c. should d. could

38. Market rent ............... be used as a basis of value when valuing a lease or an interest
created by a lease

a. may b. must
c. should d. could

39. Market rent ............... be used as a basis of value when valuing a lease or an .............
created by a lease

a. must; consideration b. should; agreement

c. may; interest d. could; registered deed

40. ............ rent is the rent payable under the terms of an actual lease

a. Market b. Estimated
c. Contract d. Hypothetical

41. Equitable value is the estimated price for the transfer of an asset or liability between
................ knowledgeable and willing parties

a. Known b. Identified
c. Unknown d. Unidentified

42. Equitable value is .............. concept than market value

a. a more limited b. a shorter

c. a broader d. an irrelevant
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43. ................ value is the value of an asset to a particular owner or prospective owner for
individual ................ or operational objectives

a. Investment; investment b. Market; utility

c. Equitable; investment d. Forced sale; utility

44. Investment value ....................... basis of value

a. is a non entity-specific b. is not an entity-specific

c. is an entity-specific d. is an entity non-specific

45. Synergistic value is the result of a combination of two or more assets or interests
where the combined value is than the sum of the separate values. It is ...................

a. Equitable b. Merger
c. Synergistic d. Lovable Value

46. Liquidation value should take into account the costs of getting the assets into ...................
condition as well as those of the ................... activity

a. saleable; disposal b. marketable; saleable

c. saleable; not marketable d. marketable; not saleable

47. One of the following is not the premise of value

a. Highest and best use b. Lowest and least use

c. Force sale d. Orderly liquidation

48. “Synergies” refer to the benefits associated with ............ assets

a. Assembling b. Dismantling
c. Combining d. Separating

49. What are the valuation approaches based on?

a. Economic principles of price equilibrium

b. Anticipation of benefits
c. Substitution
d. All of the above
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50. What should a selection process to be considered while selecting a valuation

approach? Select all that apply.

a. The appropriate basis(es) of value and premise(s) of value, determined by the

terms and purpose of the valuation assignment
b. The location of the valuer
c. The appropriateness of each method in view of the nature of the asset, and the
approaches or methods used by participants in the relevant market
d. Cost of debt

51. Valuers must use more than one method for the valuation of an asset.

a. True b. False

52. In order to comply with IVS, a valuer must use methods defined and mentioned in the
IVS.

a. True b. False

53. How should the relevant observable market information be used?

a. should be used for updating the market approach

b. should be used to obtain cost assumptions from the market
c. the use should be maximised in all three approaches

54. When the subject asset or substantially similar assets are actively publicly traded. The
approach which should be considered is,

a. Income approach b. Market approach

c. Cost approach

55. Comparable listings method

a. Can be used as the sole indication of value

b. Is not a recognized valuation method
c. Can be appropriate for consideration together with other methods

56. Which of the below should be given more weight?

a. A binding commitment to Purchase or sell an asset at a given price

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b. The cost of the asset

c. Quoted price

57. What is more preferable?

1.1. First
a. Evidence of several transactions
b. Single transaction

1.2. Second
a. A transaction 3 months before the valuation date
b. A transaction 8 months before the valuation date

1.3. Third
a. Transfer of shares between two brothers
b. Transaction between unrelated parties

1.4. Fourth
a. A transaction in the company before two months
b. Non-binding offer

1.5. Fifth
a. Actively traded securities
b. Thinly traded securities

58. ’’Rule-of-thumb” valuation benchmarks,

a. Considered to be income approach

b. Should always be ignored
c. Sometimes considered to be a market approach

59. When should DLOM (Discounts for Lack of Marketability) be applied?

a. When the subject asset is smaller

b. When the market approach is to be given a weightage
c. When the comparables are deemed to have superior marketability to the subject
asset.

60. Why is DLOC (Discounts for Lack of Control) / control premium applied?
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a. To reflect differences between the comparables and the subject asset with
regard to the ability to make decisions and the changes that can be made as a
result of exercising control
b. To adjust for the stake of strategic investors
c. To adjust for the stake of financial investors

61. Which discount / premium is applied when the subject asset represents a large chunk
of shares such that an owner would not be able to quickly sell the same in the market
without negatively influencing the traded

a. Discounts for lack of marketability

b. Discounts for lack of control
c. Blockage discount

62. Which is a preferable method to apply when reasonable projections of the amount
and timing of future income are available for the subject asset?

a. Cost approach b. Income approach

c. Market approach

63. When the asset is operating at a stabilised level of growth and profits at the valuation
date, it may not be necessary to consider an explicit forecast period and a terminal
value may form the only basis for value.

a. True b. False

64. The value of an asset would be impacted by the intended holding, period of an investor.

a. True b. False

65. Valuers must ensure that ........ in the subject has been appropriately considered in
the cash flow forecasts.

a. Cyclically b. Inflation
c. Future political scenarios

66. For calculating a terminal value, valuers may apply Gordon growth model in case the
asset is
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a. Finite-lived b. Deteriorating
c. Indefinite-lived

67. Market approach / exit value for calculating terminal value is appropriate for

a. Indefinite-lived b. Deteriorating
c. Finited-lived d. All of the above

68. Disposal cost method is appropriate for deteriorating / finite lived assets.

a. True b. False

69. The rate at which the forecast cash flow is discounted should reflect

a. Time value of money

b. Risks associated with the typo of cash flow
c. Future operations of the asset
d. All of the above

70. ...................... indicates value by calculating the cost to recreating a replica of an asset.

a. Replacement cost method

b. Summation method
c. Reproduction method
d. Comparable transactions method

71. Replacement cost method is based on replicating the ............... of the asset.

a. Physical properties b. Look and feel

c. Utility

72. When the cost of a modern equivalent asset is greater than the cost of recreating a
replica of the subject asset.

a. Reproduction cost method is appropriate

b. The asset should be discarded
c. Replacement cost method should be used
d. None of the above

73. Profit margin to the creator of the asset should be included as an element of indirect
cost that would be required to replace / recreate the assets as of the valuation date.
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a. True b. False

74. Physical Obsolescence means

a. a loss of utility due to the physical deterioration of the asset or its components
resulting from Its age and normal usage that results in a loss of value.
b. a loss of utility caused by factors external to the asset, especially factors
related to changes In supply or demand for products produced by the asset,
that results in a loss of value.
c. Both a & b
d. None of above

75. Depreciation is applicable to

a. Land b. Plant & Machinery

c. Goodwill d. All of the above

76. Impairment of asset Is applicable to

a. Land b. Plant & Machinery

c. Both a & b d. None of above.

Real Property Interests

77. What is the IVS for Real Property Standards

a. IVS 300 b. IVS 400

c. IVS 200 d. IVS 210

78. Which is the highest form of Property Right

a. Development Right b. Ownership Right

c. Right of the Head Lessee d. Right of the Holder of the Property

79. Which of the following has the highest Value in a Lease Hold Property

a. Lessee’s right where Lessee has right to occupy

b. Lessee’s right where Lessee has right to occupy & transfer lease
c. Lessee’s right where Lessee has a right to occupy, build and lease
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80. Superior interest in a Real Property always has a higher Value

a. True b. False

81. Right to use land or buildings without right of exclusive possession or control is
sometimes called as

a. Easement right b. Absolute Right

c. Enjoyment Right d. Subordinate right

82. For a Hotel building, which of the following is the combination of Assets for Valuation
under IVS

a. Real Estate Property

b. Real Estate Property + Plant & Machinery
c. Real Estate + Plant & Machinery + Furniture / fittings / fixtures
d. Real Estate + Plant & Machinery +Furniture / Fittings / Fixtures + Intangible
asset attached

83. For a Hotel building, which of the following are the IVS to be followed for IVS compliance

a. IVS 101 to 105 + IVS 400 + IVS 300 + IVS 210 + IVS 200
b IVS 300 + IVS 210
c. IVS 300 + IVS 101 to 105
d. IVS 101 to 105 + IVS 410 + IVS 300 +IVS 210

84. For Market Approach Base for Real Property Interest which is one of the following unit
is not correct?

a. Price per unit area of land or building

b. Price per room
c. Price per unit of output (crop yields)
d. Price per bundle of right

85. Which of the following is not defined under glossary

a. May b. Shall
c. Should d. Must
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86. For Real Estate property right, which of the following is not a factor of comparison in
market approach valuation

a. Size b. Location
c. Proximity to Commercial areas d. Labour Rates in the locality

87. Market conditions at the time of relevant transactions & how they differ from conditions
at the valuation date Is a factor which has an impact on current market value :

a. True b. False

88. Which of the following is one of the methods under Income approach

a. DCF Method b. Adhoc Comparison Method

c. Land & Building Method d. Income Scheme method

89. Which of the following General Standards is not applicable to IVS 410

a. IVS 106 b. IVS 101

c. IVS 103 d. IVS 104

90. Which of the following improvement in progress is not considered as development

property as per IVS 410

a. the redevelopment of previously developed land

b. land allocated for development in a statutory plan
c. a fully constructed building consuming full FSI
d. the construction of buildings

91. Valuation of a development property does not require

a. Highest and Best use b. Cost of furniture

c. Sensitivity analysis d. Cost of construction

92. Which of the following is not an element to be considered for valuation of a development
property by Residual method?

a. Time table b. Discount rate

c. Completed property value d. Special value
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93. Which of the following is not an element to be considered for valuation of a development
property by Residual Method?

a. Finance Cost b. Synergistic Value

c. Consultant’s fees d. Completed property value

94. Which of the following factors may not typically need to be considered in an assessment
of the relative risks associated with the completion of a development project?

a. delays in obtaining statutory consents

b. professional fees of architect
c. unforeseen complications that increase construction costs
d. regulatory changes

95. Which of the following factors may not typically need to be considered In an assessment
of the relative risks associated with the completion of a development project?

a. unforeseen complications that increase construction costs

b. supplier failures
c. delays in obtaining statutory consents
d. Rate of discount

96. Discount rate in residual method for estimation of value of a development property
shall be derived using any of the methods as prescribed in

a. IVS 101 b IVS 102

c. IVS 103 d. IVS 105

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ANSWERS

01 - b 11 - d 21 - c 31 - c 41 - b 51 - a
02 - a 12 - d 22 - a 32 - a 42 - c 52 - a
03 - d 13 - c 23 - b 33 - b 43 - a 53 - c
04 - a 14 - b 24 - c 34 - a 44 - c 54 - b
05 - c 15 - b 25 - a 35 - a 45 - b 55 - c
06 - d 16 - b 26 - d 36 - d 46 - a 56 - a
07 - b 17 - a 27 - a 37 - b 47 - b 57 - a, a, b, b, a
08 - c 18 - c 28 - d 38 - a 48 - c 58 - c
09 - b 19 - b 29 - b 39 - c 49 - d 59 - c
10 - c 20 - b 30 - d 40 - c 50 - a 60 - a

61 - c 71 - c 81 - a 91 - b
62 - b 72 - a 82 - d 92 - d
63 - a 73 - a 83 - d 93 - b
64 - a 74 - a 84 - c 94 - b
65 - a 75 - b 85 - c 95 - d
66 - c 76 - b 86 - d 96 - d
67 - d 77 - b 87 - a
68 - a 78 - b 88 - a
69 - d 79 - c 89 - a
70 - c 80 - a 90 - c

- Courtesy : Mr. R. Jayaraman

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Correct me if I am wrong
- BK