Risks of Property Value Apportionment

The purpose of this paper is to address the risks related to the apportionment of assessed property’s
market value. The valuation of property is a complex procedure which results in a unique market
value of the property at particular date of valuation. The valuation can be performed for different
purposes, including financial reporting, where the accountants have to recognise the value of the
building or any other improvements separately from the value of the land. Therefore, professional
valuers should use an adequate method to apportion the market value to these two parts. The authors
will explain how this procedure should be performed and recommend the appropriate professional
framework i.e. recognised valuation standards that valuers should use. The paper also presents an
example of apportionment of the derived property fair value between the land and the building. In
the final part of the paper, the authors will provide an opinion on the potential risks of inadequate
apportion of the derived market value of the property and possible effects on financial reporting
of an entity and further business operations.