American Appraisal. 111 years of appraisal experience
Fair appraisal of local companies and assets is the most important condition for improving an investment image in any country and, therefore, its level of economic development. American Appraisal Company is a recognized world leader in this field. We have asked Erlan Eszhanov, American Appraisal Managing Director in Kazakhstan and Central Asia, to inform us about its current business on the global scale and company operations in our republic.
Our company was among the pioneers of the appraisal industry. In fact, it was American Appraisal in 1896 who established the profession of an appraiser in USA. Today, after more than 110 years, we continue to actively participate in the development of international valuation standards and assist national appraisal organizations. During these long and successful years our company established 50 offices in 16 countries worldwide. For the time being, American Appraisal staff accounts for more than 900 experts, valuing assets in oil, gas and mineral resource industries as well as energy, metallurgical, telecommunications, machine-building, construction, chemical, and food-production sectors.
The company has accumulated extensive experience in cooperation with governmental organizations, regulatory authorities, security exchange commissions, and large international corporations, which are listed in Fortune 500.
American Appraisal has been running business in CIS since 1996; we now have representative offices acting in Moscow, St. Petersburg, Kiev, and Almaty. The company owns international, Russian and Kazakhstani licenses in addition to appraisal operations certificates. Our reports are used for financial reporting and taxation in accordance with IAS, US GAAP and national accounting standards. Our company employees have the necessary qualifications for running comparative analysis and evaluation of stocks, options, intellectual property and intangible assets.
Being a sponsor of the International Valuation Standards Committee (IVSC), American Appraisal is actively involved in preparation of International Valuation Standards. Our employees are members of National and regional committees of the American Society of Appraisers and Appraisal Institute; also they head Appraisal Foundation, Appraisal Issues Task Force and Valuation Standards Council.
It can be assumed that American Appraisal, in a way, is a dominator in the appraisal industry. Would you please share information about your company’s business in the standardization services?
Serving the clients throughout the world, we closely cooperate with the largest auditing firms, specifically, with Big Four. At the same time, we apply uniform corporate standards, international appraisal standards, Royal Institution of Chartered Surveyors (RICS) and Red Book rules. Moreover, asset valuation is carried out in compliance with respective local standards.
In-house database allows us to estimate the value of the assets with the consideration of the respective business sector specifics, and based on technological characteristics of the subject property and to compare similar projects or companies, as well as to make cost matrixes. Generating a large volume of information, we offer a full range of financial valuation consulting services and corporate planning, as well as following up deals consulting (consulting prior to and after deals).
Our colleague, Jerald Mim, is currently heading the Appraisal Issues Task Force (AITF) in San-Francisco, established by the recommendation of the Security Exchange Commission (SEC) in USA. The Task Force provides SEC with information on the issues of appraisal methodology for the purposes of financial reporting in compliance with FAS 141, 141R, 142, 144, 157, and 123R. Mr. Mim is also a member of the Valuation Resource Group, organized by the Financial Accounting Standards Board (FASB).
Moreover, American Appraisal employees are involved in cooperative work with regulatory authorities all over the world. Today, our colleague in London, Mr. Nick Andersen, is a representative of a committee, developing recommendations for intellectual property identification and appraisal, organized by the International Valuation Standards Committee (IVSC).
Mr. Sammy Lay, the head of American Appraisal branch in Beijing, is cooperating with the Chinese Society of Appraisers on the subject of developing similar recommendations.
Mr. Lee Hacket, the company Vice-President, is a Head of the American Foundation Board of Trustees, involved in developing American Valuation Standards USPAP. Mrs. Carla Glass, the Head of our office in Dallas, administered the committee at the Appraisal Standards Board, as a part of the Appraisal Foundation.
What is your company policy on the quality of offered services?
Since American Appraisal brand name is the most valuable asset of the company, our business reputation is of first priority.
We developed the program of quality provision, which includes the control over procedures and the audit of an expert’s conclusion for the asset’s value.
American Appraisal has internal World Practice Policies & Standarts (WPPS), which totally meet the requirements, set by international appraisal, accounting and reporting standards as well as guarantee the high quality of our service.
American Appraisal experts throughout the world pass annual certification for professional behavior principles. The key factor ensuring our projects successful outcome is an open interaction both inside the organization, and with our clients. For these purposes we employ a horizontal management system, which defines every single employee as a constituent part of the company’s strategy. Thanks to this horizontal management system we have free interaction in the use of resources, global database, and investment in technology.
The American Appraisal Company has work experience in both developed and developing countries. Can you please give your comment on specifics of the Kazakhstan appraisal services market? What factors hamper its development?
The Appraisal services market in Kazakhstan has emerged without the legal and organizational plant and property, as well as framework, necessary for its appropriate creation. The privatization of government owned assets in real estate, launched in 1995, became a catalyst for the emergence of an appraisal business in the republic.
The dynamic growth of the sub-prime real estate market as well as rapid development of banking and insurance sectors called a demand for an increase of appraisal services. Thus, the national wealth of today’s Kazakhstan, which is currently being estimated on a regular basis, reaches about 8 trillion tenge (88% of which, fixed assets account for). Speaking of mass valuation and re-valuation of non-financial assets (Land improvements, equipment, natural and intangible assets), Kazakhstan has not launched this process yet.
The domestic market of appraisal services is still at its initial stage of development – preparation for system consolidation, organization of operations, development of standards and ethical behavior norms for appraisers. This process goes slower than we would like to see it. The next stage in market development will be an approach to fixed assets valuation as a subject of the investment business.
The development of an appraisal services market is hampered by poor land legislation. The adopted law on appraisal operations strengthened the leading role of the government in this area. The document confirmed traditional governmental preferences given to mainly centralized management systems. In this concern, the regulatory body established a norm on mandatory state-issued licenses for appraisal operations. It is worth highlighting that international experience demonstrates that regulation rights in this field are transferred to professional associations.
Unfortunately, two different assets valuation standards have been developed by state authority in Kazakhstan. In this sense, we believe that today’s major task is to develop valuation standards; without having such standards it is impossible to attract substantial international investments.
How would you estimate the future potential for the appraisal services market in Kazakhstan?
They seem to be tremendous. Every year the mergers and acquisitions market demonstrates a dynamic growth. The number of Kazakhstani companies, listed on the stock exchange, continues growing. Therefore, the demand is expected to increase for providing services association with the business enterprise, stocks and intangible assets, valuation as well as impairment test and acquisition cost allocation.
Globally thinking, the appraisers will have to estimate and re-estimate all the capital assets in the country and monitor a legal base for assets appraisal. One of the major sectors should be the valuation of industrial and innovative technologies, so that Kazakhstan could enter the top 50 most competitive nations in the world.
The lack of qualified appraisers is already evident now. Today, there are about 100 appraisal and consulting companies in the republic and more than 2 thousand appraisers. At the same time, according to preliminary estimates, we will need about 8 thousand experts in order to value the entire national property in Kazakhstan. For reference the number of licensed and certified appraisers in USA exceeds 82 thousand. Every year nearly 5 million real estate properties in this country change owners with assistance from appraisers.
In the beginning of October, Alpine Business Books House will publish a “Valuation of a company. IFRS reporting” book in Russian. The translation and professional editing of this book were performed by American Appraisal experts. We hope that this book will be interesting for the experts of the oil and gas industries and the financial sector. It will help them to prepare IAS-based reports, based on Fair value, which is more and more often used as a basis for financial reporting, and the experts of American Appraisal every day help its clients to estimate this value.
Table of contents
Development Institutions. Results and Plans of Kazyna Kayrat Kelimbetov
Political System: Reforms, Election, Cadres Daniyar Ashimbayev
Oil Pan: Porridge without Kashagan Editorial
Fuel and Energy Sector. Reserves, Output and Investment Elvira Jantureyeva
Kazakhstan and China: Ahead of Forecasts Zhang Xiyun
Striving for Harmony through Responsibility Arman Abdykalykov
Energy and Geopolitics. China and Central Asia Mehmet Ogutcu, Xin Ma
It is High Time We Had a Fleet in the Caspian Sea Sergey Smirnov
Internet in Kazakhstan. Glitter and Poverty of the .kz Zone Aleksandr Vasiliyev
American Appraisal. 111 years of appraisal experience Erlan Eszhanov
Corporate Finance: Bonds Yerbolat Yeleshev
Statistical Overview on Economy and Society Yuri Shokamanov
