C-Store Valuations
The Convenience Retail Experts

How We Can Help You Implement IFRS
and Valuation for Financial Reporting (VFR)

International Financial Reporting Standards are regulatory standards of practice for accountants in how assets and liabilities are reported on a company’s financial statements, such as the balance sheet.  The world is moving toward the common practice of reporting assets at market value.  This has always been the case.  In the case, particularly in the United States, assets were frequently reported at book value.  Book value is an accounting concept that quite different from market value.  Because real estate is an asset whose value is reported as part of property, plant and equipment on the balance sheet, appraisers are now involved in the process of appraising real estate for the purposes reporting the value of these assets on the company’s financial statements.


The International Accounting Standards Board (IASB, former International Accounting Standards Committee IASC) was founded i 1973 as a result of an agreement by accountancy bodies in several countries with the objective to "develop... a single set of high quality, understandable and enforceable global accounting standards” Until now the IASB has included all 143 professional accountancy bodies from 104 countries that are members of the International Federation of Accountants (IFAC) and has therefore gained worldwide recognition. Although the IFRS is mandatory for all European listed companies since 2005, the SEC has refused to approve the proposed rules until now. But there is still hope that either the SEC will accept the IFRS in the future and/or that the Financial Accounting Standards Board (FASB) will adjust their rules to a “fair value” concept similar to the one used by the IFRS.  The development of new standards “is [thereby] a dynamic international process which involves most countries” The IASB has no national authority.  It is the task of the national bodies to adopt these standards into their local jurisdiction. The choice of reporting today falls under two options.  Publicly-traded companies can report the value of their assets at book value or fair market value.  In the future, assets will be reported at fair market value.
Below is an example of an actual retailer in the U.S.  Here, the stock price of the company increased by 34% in a single day because of reporting real estate at the higher fair market value instead of book value.  Marsh Supermarkets is a dramatic example of how book value and market value can be quite different.  The highlighted text that follows is reprint of a news article the recently appeared in the convenience industry trade publications.


Real Estate Appraisal of Supermarket’s Land Causes Stock to Soar


After an appraisal of its real estate holdings revealed an increase of $100 million to $150 million more than the book value reflected in its financial statements, the stock of Marsh Supermarkets in Indianapolis shot up in early March, according to Supermarket News.


Marsh owns the real estate and buildings for 34 supermarkets and 44 convenience stores, as well as a distribution center, company headquarters and other properties, and is currently searching for a buyer for the company as part of a strategic review. The real estate appraisals were performed in connection with the ongoing review, as well as for recent loans secured by various properties, the company said. The book value, determined by subtracting liabilities and depreciation from assets on the balance sheet, and reported most recently in Marsh's annual report last June, was $15.72 per share: Marsh Class A shares were trading as low as $6.25 in recent weeks.


Doug Dougherty, executive vice president and chief financial officer for Marsh, speculated that the real estate news might have been a factor in Marsh stock skyrocketing last week, with Class A shares gaining more than 23 percent to close at $8.89 and Class B shares climbing nearly 34 percent to $7.90, in a single day. The lightly traded stocks did 10 times their average daily volume. "The asset value of the company may be higher than some people may have believed, or they hadn't focused on it," Dougherty said.


Affordable and Efficient Compliance

PetroMARK® is the most innovative development in the downstream petroleum industry to help you implement the market value-based reporting requirements of IFRS.  Nothing is faster or more efficient.  And, this means less cost to you for compliance.


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