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Valuation Uncertainty Quantitative Estimation and Reporting

Sorana Crisan

The Valuation Journal, 2013, vol. 8, issue 1, 4-25

Abstract: Following the economic crisis there were many discussions regarding the role of fair value in financial reporting and the reliability of financial statements made under fair value. Subsequently, the valuation process itself was more thoroughly analysed and valuation uncertainty became a current topic. The International Valuation Standards Council (IVSC) proposed a new Technical Information Paper (TIP) regarding this subject. As Romanian appraisers are less familiar with the concept of valuation uncertainty and the necessity to report it we have considered that a literature review regarding valuation risk and uncertainty and an analysis of the alternatives to quantify it would be appropriate. In this paper we make a synthesis of uncertainty driving factors and of the ways to present uncertainty impact over the estimated value in a valuation report, including a quantitative estimation. Our aim is to provide appraisers with a useful alternative for the approach of this aspect in an appraisal report. We have recourse to a simple study case that presents solutions of uncertainty quantification that can be easily understood and used in practice by valuators.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:vaj:journl:v:8:y:2013:i:1:p:4-25