Assets valuation in accordance with IFRS

Client

Multinational Oil & Gas Company

Objective

To determine the fair value of the company's immovable and movable assets for amending its financial statements in accordance with IFRS.

Approach

Swiss Appraisal consulted with our client to develop and agree an ambitious scope of works involving:

• Identification and physical inspection of the company's assets, including technical certificates;
• Compilation and categorization of the company's complete asset register, which included commercial & industrial real estate, vehicles, specialized & non-specialized equipment;
• Compilation of sample register containing similar assets in each category for comparison:
  • specialized equipment, being more complex, is usually sold together with an operating business (i.e. not disassembled). The use of an income approach was determined ineffective due to insufficient development of the rental market for production capacities. Therefore, a cost approach was applied;
  • valuation of the oil wells were made using the method of the average unit cost of drilling, the data from which were provided by the design and estimate department of the oil company. Additional costs (various design and survey work, etc.) were accounted using the calculated coefficient of appreciation;
  • costs of pipeline were calculated by applying a standard comparison method along with corresponding correction factors.

Results

The combination of different approaches and methods used for the valuation allowed Swiss Appraisal to significantly improve the accuracy of the assessment, and obtain a fair value of our client's total assets in accordance with the IFRS. Swiss Appraisal's valuation report clearly and concisely presented the results of these complex and diverse approaches and methods.



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