A Study of Variances in Development Appraisal in Uyo

Abstract

Variables considered in development appraisal sometimes assume character and behavioural distortions and magnitude. Thus, this study was aimed at examining whether there is significant difference between predicted variable values as used by appraisers and actual values on the execution of the project. In attempt to achieve this, the study surveyed a cross section of 36 estate surveying and valuation firms' reports and their clients in Uyo. Analysis of Variance (ANOVA) at 5% level of significant was used to confirm the difference. The study found that there is significant difference between the estimated variable values as adopted by development appraisers in their reports and the actual or realised values of such variables on execution/completion of the projects. It further revealed that development period had the highest difference between the estimated and actual period followed by interest rate adopted and cost of construction. It was suggested that henceforth, appraisers should provide their clients with an understanding of fluctuation in these variables and point out that development appraisals were prepared on assumptions of economic stability.

Enhancing Accuracy and Consistency in the Valuation of Plant and Equipment Through Cubic Regression Models of Physical Deterioration

“…(Interna onal Valua on Standards, 2017). Depreciated Replacement Cost (DRC) is 'the current cost of reproduc on or replacement of an asset less deduc ons for physical deteriora on and all relevant forms of obsolescence and op miza on' (Ogunba, 2013) Deprecia on from the view point of valua on standards means a loss of value in a property/asset due to three types of deteriora on: physical deteriora on, economic obsolescence and func onal obsolescence. Physical deteriora on is a situa on where an asset (building, plant and equipment) suffers a reduc on in value due to age, wear and tear.…”

“…Func onal obsolescence in P & M valua on is a loss in value of assets caused by advances in technology that result in new P & M assets that are cheaper and more efficient than the asset being valued. Economic obsolescence is loss in value of an asset resul ng from changed economic condi ons which reduce the capacity u liza on of the asset being valued (Ogunba, 2013). The typical P & M valua on involves the valuer determining the replacement cost of the P & M asset, and then make deduc ons for physical deteriora on, func onal obsolescence and economic obsolescence.…”

“…However, these financial accoun ng deprecia on models have divergent assump ons about how physical deteriora on is pa erned over service life. For instance, as Ogunba (2013) states, the straight-line deprecia on model writes off the value of an asset in a constant rate throughout the useful life of the asset, while the reducing balance and sum of year's digit deprecia on models assume a higher deprecia on at the early stage of the service life of an asset and a decreased deprecia on at the later service life of the asset. The sinking fund deprecia on model assumes a higher deprecia on in the later years of assets.…”