Valuation is a combination of both art and science. Though scientifically objective in its specific approaches and methodologies, valuation work can be an artfully subjective undertaking. Five valuation experts, using the same procedures, could still end up with five varying opinions due to different growth expectations, bases of assumptions, and other factors. However, in a world where valuation is commonplace in financial reporting, legal disputes, and mergers and acquisitions, where accuracy and dependability are necessary in assuring public trust, the question remains, “Can we put our trust in the art of valuation?”.

The Philippine Valuation Standards and the World

Founded in 1981, the International Valuation Standards Council (IVSC) is known today as the global standard-setter for the valuation profession, which, through its published valuation standards and code of ethics, provides more consistency, transparency, and public confidence in asset valuation. Today, the IVSC has over 170 members across 130 countries.

Meanwhile, in the Asia Pacific region, there are currently three prominent organizations involved in business valuation, namely: The China Appraisal Society, the Institute of Valuers and Appraisers of Singapore, and the Accounting Professional & Ethical Standards Board (Australia and New Zealand).

In the Philippine context, though we do not have any organizations that seek to standardize professional valuation work, the Bureau of Local Government Finance under the Department of Finance (DOF), did make some efforts to improve the valuation work of local government entities. In 2009, the first edition of the Philippine Valuation Standards (PVS) was published as an adaptation of the International Valuation Standards (IVS). In 2018, the Philippines published the second edition of the PVS and formally joined as a member of the IVSC. Though a big leap in advancing the local professional valuation scene, it should be noted that the PVS was merely created for the purpose of real estate valuations conducted by local government assessors and other DOF agencies.

Setting Valuation and Ethical Standards in the Philippines

There is a need to set valuation standards in the Philippines – not because it is reasonable or trendy to do so, but rather because of the rapidly changing financial, legal, and business environment in the country. Moreover, it should not just be limited to valuation work covered by a specific agency, but rather on a macro-economic level across all government agencies and industries.

From an accounting perspective, we have in recent years seen a shift from recognizing assets at cost to recognizing them at fair value in our Philippines financial reporting standards.

From a legal perspective, we have also seen a growing number of legal disputes, ranging from shareholder disagreements, taxation disputes, and contractual and tortious litigations, where valuations need to be held to higher standards in the pursuit of justice.

From a business standpoint, the increasing occurrence of mergers and acquisitions has also led to an increase in regulations by the Securities and Exchange Commission (SEC) that require valuation and fairness opinion reports, especially for publicly listed companies. The increase in mergers and acquisitions has also led to an increase in the need for valuation of intangible assets such as intellectual properties, goodwill, and customer relationships.

Adhering to valuation standards, however, is not sufficient on its own. To exhibit competency, valuation experts should also adhere and be held accountable to a code of ethics to ensure that the quality of work can be trusted in the first place. Being subjective in nature, valuation opinions can be easily swayed by emotions, values, culture, personal biases and other controllable or uncontrollable circumstances; and as such, ethical standards must also play an important part in the valuation environment.

Uniting Valuation Professionals

With the increasing dependency on valuation work in the Philippines, there is undoubtedly a need for valuation professionals to come together with the ultimate goal of exchanging best ethical practices, strengthening the network of valuation experts, promoting advocacies, promoting and establishing valuation standards, and positively influencing regulations, which other professional organizations in accounting (i.e., Philippine Institute of Certified Public Accountants), law (Integrated Bar of the Philippines), the sciences, and other fields are currently practicing. And when that day comes, we will be able to, at the very least, place more confidence and trust in the subjective art of valuation.


As published in The Manila Times, dated 01 February 2023