Why the restoration method is flawed
Source: The Tax Specialist Journal Article
Published Date: 1 Feb 2016
The market value of specialised land assets as part of a going concern business is not always readily observable because they may be rarely, if ever, traded on a standalone basis. Accordingly, a restoration method is sometimes used in assessing the market value of specialised land assets for land rich assessment purposes. This method seeks to value the specialised land assets by assessing the restoration costs of some selected non-land assets, using the restoration costs as a proxy for the value of the selected non-land assets, and subtracting the value of the selected non-land assets from the market value of total assets to arrive at a residual value which is said to be the market value of the subject land assets.
In this article, the authors argue that the restoration method is an inappropriate methodology. Its deficiencies result in the assessed market value of the subject land assets being inherently understated.
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Details
- Published By: Hung Chu, Wayne Lonergan
- Published On:1 Feb 2016
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