Valuation Services

VALUATION SERVICE

Written by Dewi Tri Utami on 20/06/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

The increasingly integrated and interconnected world economy requires standardized information for policy making and effectiveness that is accurate and comparable between various countries in parts of the world. The widely accepted assessment becomes a reference in the financial sector and other sectors, whether for financial reporting, fulfillment of statutory requirements or debt guarantee, and other activities. For this, a Valuation Service is needed.

With this service, we provide valuation services as required by our clients. The process to determine fair market value, investment value or intrinsic value of the business are using many different techniques of valuation. We work with certified appraisers to generate a written report that you can use for fulfilment of regulatory requirements.

What is Valuation Service?

Valuation Services or Appraisals Services is a profession that performs professional and analytical valuation to determine the value of assets, properties, shares, companies, values, and land following the Indonesian Valuation Standards (Standar Penilai Indonesia (SPI)). SPI is a basic guideline for the implementation of assessment tasks in a professional manner. SPI is also essential for the assessors to provide results in the form of analysis and opinions. In certain situations, SPI provides suggestions by presenting them in the form of assessment reports. It is done so that there is no misinterpretation for service users and the public in general.

Appraising is a work process to provide estimates and opinions on the economic value of an object of assessment. It is performed at a specific time following SPI and the applicable laws and regulations. An asset valuation consultant or assets appraiser must master the valuation sciences to determine the valuation approach, method, and purpose.

Objects of assessment can be in the form of financial statements, assets for debt guarantee purposes, public sector assets for financial reporting, development land for public use, assets for auction purposes, real property, agricultural property, machinery and equipment, tangible and intangible assets, and businesses.

Of the various valuation objects in every line of the economy, business purposes and company internal information need valuation consultant or asset valuation services. For example, a financial statement can include the value of company assets, which is very useful for investors. Anything that can be assessed produces value, and that is why asset valuation services can be included in various fields. With the development of property development, there is also a need for asset Valuation or Valuation services.

Valuation Purpose

The purpose of asset valuation is to determine the assets’ real value. As in a company, if the company’s performance is good, the valuation value is also good. On the contrary, if the company’s performance declines, the valuation value also declines. When that happens, the company needs to make decisions to prevent bankruptcy. Valuation value can also bring opportunities such as investments. A good valuation value can attract more investors to invest. Asset valuation is also beneficial for internal purposes because it helps to understand the company’s condition.

A valuation process needs an independent appraiser or an appraiser consultant. Those appointed appraisers must not have any conflict of interest with the one who assigns them and the asset owner. The appraiser must also have an appraiser certificate issued by the association to ensure that the Valuation result is accurate, impartial, and can be held responsible.

Types of Valuation

According to the Regulation of the Minister of Finance of the Republic of Indonesia Number 228/PMK.01/2019, it states that the Field of Valuation services includes:

Simple Property Valuation;
Property Valuation;
Business Valuation; and
Personal Property Valuation

Graded objects are as follows:

Simple Property Valuation
- Vacant land for settlement with a maximum area of 5.000 m², intended for a residential unit;
- 1 unit apartment, residential house, shop house, office house, or kiosk, building equipment and supplies which are part of the attached apartment;
- 1 unit of individual machines used in residential houses, shop houses, or office houses, including electric power generators (generators) and water pumps;
- 1 unit of transportation with the classification of passenger cars, load cars, and motorcycles, which are not transportation fleets;
- 1 single warehouse unit with a maximum area of 500 m² of land and building each.
Property Valuation
- Land and buildings and their accessories, as well as other developments on land;
- Machines and equipment, including assembled installations within a single unit and/or production process;
- Transportation equipment, heavy equipment, communication equipment, medical equipment, laboratory equipment and utilities, office equipment and furniture, and military equipment;
- Telecommunications equipment includes network transmitter and receiver equipment, satellites, earth stations, agriculture, plantations, animal husbandry, fisheries, forestry, and mining.
Business Valuation
- Business Entity;
- Securities, including their derivatives;
- Company rights and obligations;
- Intellectual property rights and intangible assets;
- Economic losses caused by certain activities or events to support various corporate actions or material transaction;
- Fairness opinion;
- Financial instruments.
Personal Property Valuation
- Factory, including its installation, which is a single unit;
- Machines and equipment, including assembled installations within a single unit and/or production process;
- Transportation equipment, heavy equipment, communication equipment, medical equipment, laboratory equipment, utilities, office equipment, furniture, military equipment;
- Telecommunications equipment includes network, satellite, and earth station transmitting and receiving equipment.

The regulation also explains that Public Appraisers with Property Valuation services can provide other services related to Valuation activities. Those activities include property development consulting, asset information system design, property management, business feasibility studies, property agent services, project financing supervision, best use studies, and asset optimization studies.

Why Do You Need Valuation Service?

Valuation services is essential when you want to acquire a company and know how much assets the company’s own. Furthermore, random people cannot do the appraisal of such assets. Valuation service can help to provide you with a suitable appraiser. When conducting an assessment, an appraiser must follow strict regulations from the Indonesian Appraiser Code of Conduct (Kode Etik Penilai Indonesia (KEPI). When accepting employment or before signing an employment agreement to carry out work, the assessor must carefully identify the presented problems and ensure that he has experience and knowledge.

With a proper valuation, we can know whether the valuation of the assets we have follows the applicable laws, techniques, and provisions of the Indonesian Valuation Standard (Standar Penilaian Indonesia (SPI)).

Who Can Perform a Valuation?

The person who can carry out the assessment is the appraiser who has the qualifications, abilities, and experience in Valuation practice activities to obtain economic value in accordance with the field of expertise they have.

Certified Appraiser

Someone who has passed education in the field of assessment organized by the Association of Appraisers Profession, other educational institutions accredited by the Association of Appraisers Profession, or formal educational institutions.

Public Appraiser

An appraiser who has obtained permission from the Minister of Finance.

Public Valuation Service

A business entity that has received a business license from the Minister of Finance as a forum for Public Appraisers in carrying out business in the field of assessment and other services.

Assessment Report

After the assessment is carried out, an assessment report is created. An assessment report is a document that lists assignment instructions, objectives and basis of value, and analysis results that produce value opinions. The assessment report can also describe the analysis process carried out in the implementation of the assessment and state the critical information used in the analysis.

The Assessment Report can be verbal or written. The type, content, and length of the report may vary depending on the user, legal requirements, property type, and the nature and complexity of the assignment.

There are two types of Assessment Reports:

Verbal Report

The assessment results are communicated verbally before the court hearing as an expert witness or testifier. A report communicated orally to the assignor must be supported with a working paper and at least followed up with a written assessment summary.

Written Report

The assessment results are communicated in written form, manually or electronically. A written report may be a detailed narrative document containing all related material tested and analyzed to obtain a conclusion of value or a concise narrative document, including reassessment, forms used by the Government or other agencies, or letters shown to the assignor.

In general, the written assessment report consists of 3 types:
- Detailed Assessment Report
  
  A report that describes the information in detail and comprehensively. This report should contain all important information in the assessment, including a detailed discussion of each matter stated in the report. This report requires a level of depth of investigation, as referred to in the scope of the assignment.
- Concise Assessment Report
  
  A report that reveals information concisely. This report should contain a summary of all the important information in the assessment and include one or more paragraphs summarized in the form of a short narrative or form. This report is highly dependent on the level of depth of the investigation referred to in the Scope of Assignment.
- Limited Assessment Report
  
  A report that reveals minimum information. The content of reports is usually determined by the assignor, who only needs the information to be briefly stated and is usually a combination of a brief narrative statement and a simple fact or bulleted point. This report is highly dependent on the investigation and the assumptions referred to in the Scope of Assignment

How We Can Help

Putranto Alliance helps provide valuation services as required by our clients. The process to determine fair market value, investment value or intrinsic value of the business are using many different techniques of valuation. We work with certified appraisers to generate a written report that you can use for fulfilment of regulatory requirements. We also provide an in-house report if you only require a general guideline on the value of the business or product.

References

PMK No. 228/PMK.01/2019 tentang Perubahan Kedua Atas Peraturan Menteri Keuangan Nomor 101/PMK.01/2014 Tentang Penilai Publik [JDIH BPK RI] ❯

Buku KEPI & SPI Kode Etik Penilai Indonesia dan Standra Penilai Indonesia) Edisi VII-2018

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