Q & A Database
The GIPS Standards Q&A database contains questions and answers (Q&As) on various searchable topics that provide additional interpretation on an issue. Q&As are considered to be authoritative guidance and must be followed in order to claim compliance with the GIPS standards.
Content from prior Q&As was included in the GIPS Standards Handbook as much as possible and many Q&As were archived. Change the Status drop-down filter to "Archived" to see the archived Q&As.
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ArchivedEffective: 1 January, 2008 - 31 December, 2019Categories: Real EstateSource: GIPS Executive Committee
We manage real estate investments. We have established procedures to value all investments annually, and this process is quite extensive. Beginning 1 January 2008, the GIPS standards require us to value such investments on a quarterly basis. For those quarters where we do not obtain an external valuation and we perform an internal valuation, must we replicate the current annual procedures on a quarterly basis, or can we establish quarterly procedures that are different?
An internal valuation should consider professional industry approaches to estimating value (e.g. discounted cash flow valuation model, capitalized income approach, sales comparison approach, cost approach), and a professional review and assessment of the known economic, market, financial variables, and factors that can cause material changes in the value of real estate investments. Any assumptions utilized must be fair and unbiased. The internal valuation process must be applied consistently from period to period, except where a process change would result in a more accurate estimate of market value. A firm may replicate its current annual procedures on a quarterly basis, or the firm could establish different quarterly valuation procedures. Each firm must decide for itself what steps are necessary to determine that real estate investments are properly valued on a quarterly basis. As required by GIPS Provision 0.A.6, a firm must document, in writing, policies and procedures used in establishing and maintaining compliance with all the applicable requirements of the GIPS standards. Therefore, the firm must also document its real estate internal valuation policies and procedures.