CATEGORY: SPEECHES
Ms. Lim Hwee Hua, Chair of the Board of Trustees, International Valuation Standards Council (IVSC);
Mr. Lie Kok Keong, Chairperson of the Institute of Valuers and Appraisers, Singapore (IVAS) Council;
Mrs. Chia-Tern Huey Min, Chief Executive of the Accounting and Corporate Regulatory Authority (ACRA);
Distinguished Guests,
Ladies and Gentlemen,
Good morning.
Introduction
1. It is a real pleasure to be here with you at the IVAS-IVSC Business Valuation Conference 2024. A warm welcome to participants who are here today.
2. Valuation is an important part of the work that we are doing here in Singapore. Today marks the first time IVAS and IVSC have collaborated with the Intellectual Property Office of Singapore (IPOS) to bring different stakeholders together to discuss pertinent issues on innovation and business valuation. I am so glad to hear that this partnership has attracted one of our largest turnouts, with over a thousand attendees from around the world.
Developments in our New Economy
3. Business valuation has a long history. One of the earliest examples came from ancient Rome. At that time, vineyards were bought and sold at prices determined based on their current output. Pliny the Younger, an enterprising Roman statesman and philosopher, felt that this underestimated the value of vineyards and described in a letter that vineyards should be valued not just by their current output, but by their capacity for production. This shift paved the way for modern business valuation, by introducing concepts of future value and potential growth which are today core tenets of valuation principles.
4. Since then, the field of business valuation has evolved significantly. New concepts and principles are constantly being introduced, to keep up with new trends, new technology, and new stores of value. With evolving trends, what was valuable in the past may not be as valuable tomorrow. Conversely, assets that were once overlooked may gain importance. This is the reality of our changing world and the realities of the field of valuation.
5. One of the more recent trends that has changed the way we value businesses is the growing potential of intangible assets like intellectual property (IP), data, digital assets and even environmental, social and governance (ESG) practices. Some have even described data as being the ‘new oil’.
a. In 2023, intangible assets (IA) made up over 90% of market value of S&P 500 companies, a substantial increase from just 17% in 1975.
6. It is hence important that valuers seek to understand the characteristics of intangible assets. This is so they can play the important role of helping companies to identify, manage and monetise these assets.
7. It is therefore timely that the theme for this year’s conference is “Intangible Impact: Unlocking Business Value in the New Economy”. Indeed, AI and sustainability present many new opportunities for the valuation industry, amid evolving macroeconomic trends.
Impact of AI on valuation practices
8. Let me start with AI. Recently, we have witnessed a boom in the AI industry, with AI tools becoming widely accessible for both everyday and professional use.
9. AI tools can streamline the valuation process. These tools help to analyse large datasets and identify trends, to help valuers make informed assessments.
a. For instance, valuers can leverage AI-powered analytic tools to evaluate asset performance and risk profiles, enhance the accuracy of valuation estimates, and create comprehensive valuation reports.
10. While AI offers improved productivity, we must remain cautious. Even though AI can process large datasets quickly, it lacks the nuanced understanding and the contextual awareness that human valuers have. Technology cannot replace professional human judgement. It is critical to maintain ethical standards when applying AI, to ensure transparency and accountability.
11. Therefore, the IVSC will be updating the International Valuation Standards (IVS) to clearly define the role of AI Automated Valuation Models (AVMs). These standards will come to effect on 31 January 2025, and underscore the necessity of a professional valuer’s judgement alongside all valuations produced by an AVM.
12. It is encouraging to see IVAS taking steps to keep pace with these technological developments. Singapore remains committed to contributing actively in supporting our valuation profession.
a. This year, Mr. Lie, our IVAS Chairperson, joined the IVSC Standards Review Board. Additionally, Singapore has other ongoing representations on the IVSC Financial Instruments Board.
13. Other than adopting AI tools, valuers must also account for the value of AI assets in their assessments. It is essential that this is reflected in their valuation principles and pricing, to accurately capture the value AI assets bring to a company.
Recognising the value of sustainability
14. Beyond AI, sustainability presents a significant opportunity for the valuation industry.
a. At last year’s United Nations Climate Change Conference, COP28, member states agreed to reach global net zero emissions by 2050.
b. In Singapore, we will start requiring climate reporting in phases, beginning with listed companies from financial year 2025.
15. Valuers who are trained in incorporating climate-related considerations will be well positioned to seize new opportunities. Understanding sustainability could help valuers provide a more accurate valuation of a company, as they consider factors such as energy efficiency and the impact of climate scenarios on business prospects. In turn, there are wider ecosystem benefits, as banks and investors can more confidently integrate sustainability factors into their lending and investment decisions.
16. To prepare valuers for the evolving demands as companies adjust to the climate transition, Singapore’s Chartered Valuer and Appraiser (CVA) programme will be updated to incorporate how ESG issues impact the valuation space. The refreshed programme will be rolled out from the second half of 2025.
Collaboration to drive growth in valuation
17. For the valuation industry to continue to thrive, it is critical that different stakeholders – valuers, professional bodies, businesses – all join forces to strengthen capabilities.
18. IVAS, IVSC and IPOS have a long-standing partnership. In 2021, they worked closely together to solidify Singapore’s position as a global hub for IA and IP, through the launch of the Singapore IP Strategy (SIPS) 2030 initiative.
19. At IP Week @ SG 2023, we introduced the Intangibles Disclosure Framework (IDF). The IDF facilitates more standardised disclosures, by outlining key principles for enterprises to communicate the details of their intangibles.
20. This year, I am happy to share that the Institute of Singapore Chartered Accountants (ISCA), as the national body for professional accountants in Singapore, is collaborating with IVAS and IPOS to launch an online professional development course in the fourth quarter of 2024. The course will guide accountants on the use of IDF to incorporate intangibles in their financial reporting process.
21. To complement the IDF, IVAS is joining forces with global Valuation Professional Organisations to establish guidelines for valuing intangible assets. International collaboration is critical for developing effective guidelines, as it helps to ensure consistency in IA valuation globally.
a. I am very heartened to hear that these efforts have been progressing well. The American Society of Appraisers (ASA), Chartered Business Valuator Institute (CBVI) and the Royal Institution of Chartered Surveyors (RICS), and IVAS will be jointly working on this endeavour.
b. The work is expected to kick off in the coming months, and the proposed guidelines are targeted for public consultation in the first half of 2025. These guidelines will provide valuers with structured methodologies for IA valuation, enhancing credibility and reliability in valuation reports.
22. These initiatives highlight the benefits of collaboration for the valuation industry. I encourage all of you to share your ideas with one another at this conference, and contribute to initiatives that will strengthen the valuation profession.
Conclusion
23. In conclusion, the business valuation landscape is constantly evolving, but it presents many exciting opportunities and I urge everyone to follow these developments closely and adopt new standards and skills as they arise.
24. I wish all of you a fruitful and enriching conference today. Thank you.
2024/08/28