The Nigerian Institution of Estate Surveyors and Valuers (NIESV) has condemned the valuation of plants and machinery by non-professionals as a source of revenue loss to government at all levels.
According to the Chairman, Faculty of Housing, NIESV, Mr. Paul Osaji, government at all levels were losing huge revenue that should come from taxes on machinery and plants, because they depend on unqualified professionals, who are neither estate surveyors nor valuers to do the valuation of these equipment.
Osaji said, â€œWith proper valuation of industrial machinery and plants, be it the breweries, aviation, communication outfits, taxes that would be generated either by the federal, state or local governments in term of revenues are so huge that their effective exploitation is capable of eliminating total dependence on revenue from oil, not to talk of engaging in external borrowing.â€
The involvement of qualified professionals, in this case, Estate Surveyors and Valuers would improve the revenue base of government, said Osaji, who is the Managing Partner, Paul Osaji & Co.
He explained the processes and a set of procedures used to determine the economic value of an ownerâ€™s interest in an asset, saying â€œValuation of Assets may generally be required for following purposes: Mergers and Acquisitions â€“ Pre Merger and Post Merger.
â€œFrom Financial Reporting Banking (Lending against Assets), it involves impairment studies, purchase price allocation, Distress Assets/non-Performing Asset, Court & Litigation support, including management information and strategic planning.
â€œOther processes include insurance, initial public offerings, cost investigations disinvestment, among others.
â€œThe scope of Valuer include complete understanding of valuation purpose, collection of data and documents and understanding, physical inspection of subject assets, market survey and collection of data pertinent to the valuation exercise.â€
Osaji said others are collection of technical details for the subject assets and analysis of technical data and the supporting information, assessment of balance economic life of the subject assets, determination of valuation parameters, methodology, basis of valuation and key assumptions.
â€œFrom the foregoing, one will not, but admitted that only those who are professionally qualified, in this case Estate surveyors and Valuers are in position to be engaged in valuation exercise, not the lawyers, the accountants, or architects. Although their services may be needed in other ancillary areas, but not in the nitty-gritty of plant valuation.â€
The reason for this, he said was that â€œPlant Valuation is highly complex in nature as our practice caters to a wide spectrum of industries each having plant and machinery with its own inherent characteristics.
â€œAmong the issues to be considered in the Plant Valuation are the specific utility or usefulness of industrial property, its contribution to the production of goods and services for which it is designed and deployed.â€
He said plant and machinery valuation was important to every companyâ€™s annual financial reporting. â€œIt is stated under the non-Current Asset and was normally reported by the accountants on two basis, either Historical Cost or Revaluation basis.
â€œBut, as a matter of fact, independent valuers must be employed to provide the current, up to date valuation on the non-current assets valuation such as property, plant, equipment and intangible assets.
â€œThis is where Nigerian governments are getting it wrong by just appointing anybody from any professional background to do the job they know nothing about.â€
Osaji explained that property valuations form important aspects of modern economy. â€œThey support the banking system by setting the benchmarks for collateral values. In the corporate sector, property valuations are important inputs in balance sheets and property assets are sought after for business loans. Property valuations are also important for the ordinary layman when they buy, sell or rent houses and other types of properties. Thus property valuations need to be carried out with a higher level of integrity and professional competence.
â€œIt is of utmost importance that Nigerian governments must realise that the International Valuation Standard Committee (IVSC), an international institution for the valuation and property management, has recognised the need for the international valuation structure via the International Valuation Standards (IVS).
â€œThe standard is essential as there are major concerns from auditors, bankers, financial analysts and company directors that a consistent basis of valuation is used, to enable valid comparisons to be drawn, for the valuation of fixed assets throughout the world.â€