Determining the Fair Value of Investment Properties in the Absence of Valuation Obtained from a Qualified Valuer

In consequence to introduction of Sri Lanka Accounting Standards (SLFRS and LKAS) compatible with International Financial Reporting Standards (IFRS), by The Institute of Chartered Accountants of Sri Lanka effective from 1st January 2012, The Company being a registered finance company with public accountability, is required to apply provisions of the full set of SLFRS/LKAS consisting 09 SLFRSs, 29 LKASs and 15 IFRICs. Accordingly, the financial statements for the year ended 31st March 2013 are the first set of financial statements prepared by this company compatible with the Sri Lanka Accounting Standards and therefore in the preparation of these financial statements company had encountered lot of issues regarding the deviations from the requirements of the accounting standards. Out of them, in this report I have discussed in detailed one of the main issues that were identified during the preparation of financial statements of this company. From this year onwards the company is going to adopt the fair value model for the subsequent measurement of investment properties. Then the issue was the determination of fair value of investment property in the absence of valuation by a qualified valuer. In such situation discounted future cash flow method is permitted by the accounting standards and how it can be done is also explained in this case study report.