IBBI publishes Revised Syllabus and other details of Valuation Examinations

The Central Government notified the commencement of Section 247 (relating to valuers) of the Companies Act, 2013 with effect from 18thOctober, 2017. It also notified the Companies (Registered Valuers and Valuation) Rules, 2017 on 18thOctober, 2017.

The Central Government, vide a notification dated 23rd October, 2017, issued the Companies (Removal of Difficulties) Second Order, 2017 to provide that valuations required under the Companies Act, 2013 shall be undertaken by a person who, having the necessary qualifications and experience, and being a valuer member of a recognised valuer organisation, is registered as a valuer with the Authority. Vide another notification on the same date, the Central Government delegated its powers and functions under section 247 of the Companies Act, 2013 to the Insolvency and Bankruptcy Board of India (IBBI) and specified the IBBI as the Authority under the Companies (Registered Valuers and Valuation) Rules, 2017.

The Companies (Registered Valuers and Valuation) Rules, 2017, as amended, require that only a person registered with the IBBI as a registered valuer can conduct valuations required under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 with effect from 1stFebruary, 2019. Subject to meeting other requirements, an individual is eligible to be a registered valuer, if he (i) is a fit and proper person, (ii) has the necessary qualification and experience, (iii) is a valuer member of a RVO, (iv) has completed a recognised educational course as member of a RVO, and (v) has passed the valuation examination conducted by the IBBI, and (vi) is recommended by the RVO for registration as a valuer. A partnership entity or a company is also eligible for registration subject to meeting the requirements. A person, who is rendering valuation services under the Companies Act, 2013, may continue to do so without a certificate of registration up to 31stJanuary, 2019.

In pursuance of the Rule 5 (3) of the Companies (Registered Valuers and Valuation) Rules, 2017, the IBBI, being the Authority, had published thesyllabus, format and frequency of the Valuation Examination for the Asset Class of ‘Securitiesor Financial Assets’ on 30thDecember, 2017 and for the Asset Classes of (a) Land and Building, and (b) Plant and Machinery on 31st December, 2017 and has been conducting examination since 31st March, 2018.

In pursuance of the said Rule, the IBBI, being the Authority, hereby publishes the syllabus, format and frequency of the ‘Valuation Examination’ to be conducted from1st April, 2019 for the asset classes as under:

a. Plant and Machinery: Annexure I

b. Land and Building: Annexure II

c. Securities or Financial Assets: Annexure III

The details of examination are available on IBBI website www.ibbi.gov.in.



Annexure I


Insolvency and Bankruptcy Board of India


Subject: Syllabus of Valuation Examination for Asset Class- Plant and Machinery with effect from 1st April 2019


In pursuance of the rule 5 (3) of the Companies (Registered Valuers and Valuation) Rules, 2017, the Insolvency and Bankruptcy Board of India, being the Authority, hereby publishes the syllabus, format and frequency of the ‘Valuation Examination’ to be conducted from 1st April, 2019 for the asset class: Plant and Machinery as under:


Sl. No.


Weight (%)


Principles of Economics


Consumption: Indifference Curve, Consumer’s Surplus, Elasticity
Price Mechanism: Determinants of Price Mechanism, Individual and Market Demand Schedules, Law of Demand & its Conditions, Exceptions and Limitations of Law of Demand, Individual and Market Supply Schedules, Conditions and Limitations, Highest, Lowest and Equilibrium Price, Importance of Time Element
Pricing of Products under different market conditions: Perfect and Imperfect Competition, Monopoly
Factors of Production and their pricing: Land, Labour, Capital, Entrepreneur and other factors
Theory of Rent
Capital and Interest: Types of Capital, Gross Interest, Net Interest
Organisation and Profit: Functions of Entrepreneur, Meaning of Profit and Theories of Profit





Functions & Role of Money
Inflation: Types of Inflation, Causes, Effects, Inflationary Gap, Control of Inflation, Monetary, Fiscal and Direct Measures
Deflation: Causes, Effects, Deflationary Gap, Measures to Control Deflation, Deficit Financing
Savings and Investment: Savings and Types of Savings, Determinants of Savings, Investment, Types of Investment, Determinants of Investment, Relationship between Savings and Investment
Components of Economy: Primary Sector, Secondary Sector, Tertiary Sector, Informal Sector in Urban Economy, Parasitic Components in Urban Economy
Concepts of GDP and GNP, Capital Formation



Parallel Economy

Definition of Parallel Economy, Causes and Effects of Parallel Economy on use of Land and its Valuation
 Its impact on Real Estate Market
Construction Industry and Parallel Economy



Book Keeping and Accountancy

Meaning and objects of Book Keeping, Double Entry Book Keeping
Books of Prime Entry and Subsidiary Books: Cash Book, Bank Book, Journal, Ledger, Purchase and Sale Books, Debit and Credit Note Register, Writing of Books, Posting and Closing of Accounts
Trading Account, Profit and Loss Account, Income and Expenditure Account
Preliminary Analysis of Financial Statements
Cost, Costing and Elements of Cost, Fixed Expenses, Variable Expenses, Break-Even Point





Indian Legal System: Salient Features of the Indian Constitution, Fundamental Rights, Directive Principles of the State Policy
Government: Executive, Legislature and Judiciary
Laws of Contract: Formation of a Contract, Parties, Void, Voidable and Unenforceable Contract, Contingent Contract, Misrepresentation and Fraud and effect thereof, Termination of a Contract, Remedies for Breach, Performance of Contract, Indemnity and Guarantee, Law of Agency
Tort: General Principles of Tort, Tort affecting Valuation
Law of Arbitration and Conciliation: Salient Features
Auction: Authority of Auctioneer, Duties of Vendor, Purchaser and Public, Misdescription and Misrepresentation, Advertisements, Particulars and Catalogues, Statements on the Rostrum, Conduct of Sale, Reservation of Price and Right to Bid, Bidding Agreements.  Memorandum of the Sale.  The Deposit, Rights of Auctioneer against Vendor and Purchaser
Laws of Evidence: Burden of Proof, Presumptions, Conclusive Proof



Salient Features of the Insolvency and Bankruptcy Code, 2016 concerning Valuation
Salient Features of the Companies (Registered Valuers and Valuation) Rules, 2017
Salient Features of the Securitization and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) concerning Valuation
Section 5 (n) of the Banking Regulation Act, 1949 on “Secured Loan or Advance”
The Companies Act 2013: Section 192(2), 230 (1), 230 (2), 230 (3), 231, 232, 247 and 281(1)



Introduction to Statistics

Data Classification and Processing, Graphical Representation of Data, Frequency Distributions
Measures of Central Tendency, Dispersion and Skewness
Elementary Theory of Probability and Probability Distributions, Sampling and Sampling Distributions, Estimation
Simple Test of Significance, Regression and Correlation, Multiple Correlation Coefficient
Time Series
Index Numbers




Environmental Issues in Valuation

Environment and Valuation – Differences between the Market Price and the Negative Value Consequent on Environmental Impact
Environmental Issues of Air Pollution, Water Pollution, Environmental Factors and their effects, Measures to Restore the Damage, Cost to Cure
Outlines of Environmental Legislations: The Indian Forest Act, 1927, The Water (Prevention and Control of Pollution) Act, 1974, The Air (Prevention and Control of Pollution) Act,1981, The Environment (Protection) Act,1986
Laws related to Industrial Health and Safety




Professional Ethics and Standards

Model Code of Conduct as notified by Ministry of Corporate Affairs under the Companies (Registered Valuers and Valuation) Rules, 2017
Ethical considerations under terms of engagements




Valuation of Plant and Machinery



Role, Functions and Responsibilities of a Plant and Machinery Valuer
Cost, Price, Value and Valuation.
Types of Market, Demand and Supply Curve, Buyer’s and Seller’s Bell Curve for Overall Sales performance
Annuities, Capitalisation, Rate of Capitalisation, Years Purchase, Sinking Fund, Redemption of Capital, Reversionary Value
Construction and use of Valuation Tables

Definitions of the various terms

Plant and Machinery, Furniture, Fixtures and Fittings – judicial interpretation of these terms
Market value, Highest and Best Use Value

Meaning of the terms

Basis of Valuation, Value in Use, Value in Exchange, Value to the Buyer, Value to the Seller, Value to the Occupier, Value in Existing Use In-Situ, Value in Existing Use in Ex-Situ, Value in Alternative Use in In-Situ, Value in Alternative Use in Ex-Situ, Liquidation Value In-Situ/Ex–Situ, Orderly Liquidation Value, Forced Sale Value
Investment Property, Marketable Non-Investment Property, Non-Marketable Non-Investment Property with their characteristics and approaches to Value
Factors having direct bearing on Value (Valuation Maxims) like Physical, Legal, Social, Economic, Utility, Marketability, Transferability, Scarcity, Present Worth of Future Benefits and Intangible Rights



Identification and Physical Verification of Plant, Machinery and Equipment (PME)

Inventory (Listing of Machinery) and data to be collected while taking inventory
Importance of Technical Specifications of Plant and Machinery in Valuation exercise
Assessment of Condition of Plant, Machinery and Equipment based on Visual Inspection
Comparing Inventory with Plant and Machinery Records maintained by the Company
Ascertaining Discrepancy
Identification of Productive, Non-Productive, Surplus and Off-Balance Sheet Assets
Age, Effective Age, Total Economic Life, Economic Balance Life, Physical Life and their importance in Valuation
Factors affecting Life, both in terms of years or hours of use, depending on type of assets and maintenance
Definition and distinction of the terms – Historical Cost, Acquisition Cost, Book Cost, Written Down Value and Net Book Value
Items in the nature of buildings to be treated as Plant and Machinery- like Chimneys to the Boiler, Brick, Concrete or RCC Foundation for Plant and Machinery, Water and Sewerage Installations, Effluent Treatment Plant etc.



Depreciation under The Income Tax Act, 1961 as well as The Companies Act, 2013
Useful Lives to compute depreciation as per Schedule II of The Companies Act, 2013
Factors to be considered for Componentization of Asset
Installed Capacity of the Plant, Actual Production, Raw Material Availability, Level of Technology used such as Current or Obsolete, Issues if any regards to these
Part, Fraction and Whole Valuation
Relationship of Earnings and Assets
Difference Between Business Specific Economic Viability and Economic Obsolescence
Efficiency of Plant Layout, Imbalances in different production sections and their relevance in valuation






Three Approaches to Value: Cost, Market and Income


Cost approach

Reproduction Cost New, Replacement Cost New, Depreciated Reproduction Cost/Depreciated Replacement Cost (DRC), Difference and similarity in DRC and Market Value
Difference between Reproduction Cost New and Replacement Cost New
Methods of Computation of Reproduction Cost New
Market Inquiry of Current Cost of Brand-New Machine with Identical Specifications from same manufacturer i.e. Replica Indexation and its limitations, Cost to Capacity Method and its limitation
Methods of Computation of Replacement Cost New when Identical Machine/Plant is not available i.e. Machine/Plant of like Kind and Type, and factors to be taken into consideration.
Direct and Indirect Costs for Estimation of Reproduction New /Replacement Cost New
Meaning of the term Depreciation for Wear and Tear, Factors influencing Depreciation-its measurements and application by Valuers of Plant and Machinery
Concept of Salvage Value and Scrap Value along with the basis of the same
Methods of Depreciation – Observed Deterioration, Straight Line, Diminishing Balance (WDV)
Difference between Accounting and Technical Depreciation.
Factors to be taken into consideration for selection of Depreciation Method
Obsolescence- Technological, Functional and Economic
Depreciated Replacement Cost (DRC) subject to Potential Profitability
Limitations of Cost Approach



Market Approach- Sales comparison method

Data Collection
Elements of Comparability and application of appropriate Weightages to Identified Comparable to Estimate Value of Subject Plant and Machinery Asset being valued. Instances when Sales Comparison Method is not feasible and limitations of Sales Comparison Method



Income Approach

The concept of Income Approach
Gross Income-Outgoings, Net Income and Year’s Purchase
Actual Income Vs Potential Income
Terminal Income
Remunerative and Accumulative Rates of Interest and various methods of determining the same
Capitalization of Earnings Method
Discounted Future Earnings Method (DCF Technique)
Pitfalls of DCF Technique





Process of Valuation

Check List for Valuation of Plant and Machinery, documents to be studied prior to Plant Visit/Inspection, ABC analysis
The items to be treated as Plant and Machinery
The items to be treated as Land and Buildings
Physical Verification (Survey and Inspection)
Data Collection and Valuation Analysis under Replacement Cost New Method (Cost Approach)



Broad categories of machines to be encountered by plant and machinery valuers in actual practice

Valuation of a machine for which current cost of identical brand-new machine is available
Valuation of a machine for which current cost of identical brand-new machine is not available
Valuation of a machine which is no longer manufactured
The reasons for the differences in the prices of the machines with same technical specifications and features by different manufacturers
The factors to be considered while adopting Cost Approach
Data Collection and Valuation Analysis under- Cost, Market and Income Approaches



Leasing of plant and machinery

Definition of Lease
Leasing, Hiring and Renting
Obligations of Supplier of Asset, User of Asset, Hire Purchase Company/Lessor in cases of Loan, Supplier’s Credit, Hire Purchase and Leasing
Leasing as an instance of Bailment, Nature of the Bailment Agreement, Features of Bailment, Contracts Law on Bailment.
Leasing Rules
Types of Leases and their characteristics
Steps in the structuring of a Lease Contract
Leasing from point of view of Lessor/Lessee
Limitations of Leasing
The structure of a Lease Agreement
Treatment of Leased Assets in Company Accounts – Accounting Practice for Leased Plant and Machinery as per Indian Accounting Standards
Assessment of Lease related risk
Risk and Return trade-off
Valuation of leased plant and machinery



Valuation of plant and machinery for following purposes

Mergers and Acquisitions (including Purchase Price Allocation)
Financial Statements
Capital Raising
Corporatization and Privatization
Stamp Duty
Any other purpose not referred above
Study of Valuation Standards as per the provisions of the Companies Act, 2013
Study of Indian Accounting Standards (Ind AS 16) as applicable to Valuation
Valuer as an Expert witness in Court
Valuers’ Functions & Responsibilities, Error of Judgement and Professional Negligence


Case laws

Fixture – Holland Vs. Hodgson (1872) L.R.7 C.P.328 at 335 (Australia)
Plant and Machinery in nature of Land and Buildings – Duncan Industries Ltd. Vs. State of U.P. and Other AIR 2000 SC 355
Obsolescence – Westinghouse Elect. Corporation 93 NC App. 710, 379 S.E.2D 37(1989) (U.S.A)
Just because a Plant and Machinery are fixed in the Earth for better functioning it does not automatically become an Immovable Property – Sirpur Paper Mills Pvt. Ltd. Vs. The Collector of the Central Excise, Hyderabad AIR (1998) 1 SCC 400: (1998 AIR SCW 366: AIR 1998 SC 1489)
Plant and Machinery in nature of Land and Buildings – Official Liquidator Vs. Sri Krishna Deo and Ors. (AIR 1959 All 247)
Valuation of specialized Plant and Machinery by Cost Approach is subject to Potential Profitability – Symex Holdings Ltd. Vs. Commissioner of State Revenue, Supreme Court of Victoria, Australia-(2007) VSC 159




Law – Plant and Machinery

Sale of Goods and Agreements to Sell, Seller’s Obligations as to delivery Time, Title, Description, Fitness, Quality and Quantity; Exclusion of Obligations, Sales by Sample, Passing of Property in Goods, Transfer of Title by Non-owner, Remedies for Breach of Contract, Rights of Unpaid Seller against Goods
Licensing of Industries and regulation of industrial activities under various laws; viz. Industrial Licensing Laws etc
Salient features of various acts such as the Factory Act, 1948, the Electricity Act, 2003, Labour laws with regards to regulatory measures for industrial undertakings







Principles of Insurance and Loss Assessment

Principles and legal concepts in relation to Insurance of Plant & Machinery, The Contract of Insurance, Insurable Interests and Liability to Insure, Duties of the Insurer and the Insured
The types of Fire Policies -Reinstatement Value and Indemnity Policies and policies for other perils, Terms and Conditions, Perils, Beneficial And Restrictive Clauses
Value at Risk, Sum Insured and Condition of Average, Over and Under Insurance, Inflation Provisions, other contents, Depreciation, Obsolescence and Betterment
Preparation of Claim for Damages due to Insured Perils
Obligations and Rights of Insurer and Insured



Machine Tools, Factory, Utility Equipment and Electrical Installations

Machine Tools – For Milling, Turning, Cutting, Drilling and Threading, Grinding, Shaping, Casting, Plastic deforming, Powder forming, Sheet metal, Welding, Fabrication
Factory Equipment – material handling and fire protection
Utility Equipment – for energy generation, energy consuming devices, for energy utilisation
Electrical Installations



Industrial Processes

Factory Planning and layout: Types of Plant Layout, Production Techniques, Automation, Mass Production, Batch and One-Off Production
Principles of Industrial Processes: Material flow, process sequences, automation and process control
Industrial Processes: The Normal Processes, Methods of Manufacture, Plant and Machinery utilised, Flow Diagrams and Inventory Compilation for the following specific industries: Textiles, Dairy, Vegetable Oil, Iron, Steel & Non-Ferrous Metal Production, Chemical and Pharmaceutical, Plastic and Rubber, Paper and Paper Products, Printing, Binding and Publishing, Food and Drink
The nature and function of trade specific machinery in the above industries




Report writing

Reports-Quality, Structure, Style
Report writing for various purposes like Sale/Purchase, Mergers & Acquisitions, Insurance, Liquidation and any other purposes for which a valuer is normally called upon for advice in general practice
Contents of the report: The Instructions (including basis of valuation) received from the clients showing scope of work, Date as on which valuation is made, Date of Report, Date of Inspection, Purpose of Valuation, Location of Assets, Valuation Definition considered, Approach/Method of Valuation, Procedure Adopted, Summary of Valuation, Assumptions and Limiting Conditions including Caveats, Schedule of Plant and Machinery with Make, Model, Description, Year, Condition, Values




Case Study

On valuation of plant and machinery mentioned under Part-7 above. This section will have a case study to test the ability to apply valuation techniques. There will be a comprehension narrating a transaction based on which questions will be asked.






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