Understanding the IOSCO Statement on High-Quality Valuation

The Growing Demand for Quality Valuations

Valuations are a critical component of modern financial reporting. From recognizing assets and liabilities to assessing impairment, these figures are central to an issuer's financial statements.

As reliance on this data grows, so does investor demand for improvements. Investors are pushing for global consistency and higher quality in the valuation information they use to make decisions. This has, in turn, attracted increased scrutiny from regulators aiming to ensure financial information is relevant and reliable.

IOSCO Pushes for Improvement and Consistency

The International Organization of Securities Commissions ("IOSCO") is an international body that brings together the world's securities regulators and is recognized as a global standard setter for financial markets regulation. IOSCO develops, implements and promotes adherence to internationally recognized standards for securities regulation. It works intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda.

IOSCO and the International Valuation Standards Council (IVSC) established a Statement of Cooperation in 2022, with the goal of promoting high-quality valuation practices and standards. Through a factfinding process that included a series of roundtables over several years, the two organizations worked together to identify ways to improve the application of best practices. This process resulted in a statement from IOSCO in November of 2025 on the importance of high-quality valuation information and key areas of focus for all parties involved.

Key Areas of Focus:

Based on its reviews of public filings, IOSCO has pinpointed five common areas where, in its opinion, valuation practices are falling short:

1.  Need for Valuation Expertise: IOSCO members often find situations where management, which is ultimately responsible for the financial statements, has limited expertise in the valuation methods being used. In these cases, using a valuation expert may be necessary to support the preparation of high-quality information.

2.  Low-Quality Inputs and Assumptions: Determining fair value often requires significant management judgement. Regulators have noted cases where assumptions are not objective, are not supported by sufficient internal documentation, or are inconsistent with other information the issuer has published.

3.   Misjudging an 'Active Market': Accounting rules give the highest priority to quoted prices in active markets. However, IOSCO has seen issuers conclude an active market exists without sufficient support, or even when evidence points to the contrary.

4.   Weak 'Identical or Similar' Comparisons: When an active market doesn't exist, issuers may value an asset (like real estate or an early-stage business) by comparing it to a "similar" one. This involves considerable judgment, and regulators have found instances where limited evidence exists to support the comparison.

5.     Inadequate Disclosures: Financial reporting standards require disclosures to help readers understand how a value was determined, especially when it relies on unobservable inputs. IOSCO has observed many instances where these disclosures lack sufficient detail and disaggregation.

Implications for Issuers and Audit Committees

IOSCO’s statement continues a trend of increased industry attention to the importance of robust valuation policies and procedures. It follows a comprehensive review published by the Financial Conduct Authority (FCA) in the UK, which arrived at a similar set of findings.

IOSCO is sending the following reminder to all parties involved in financial reporting:

• Issuers (management) must ensure they have a robust, objective, and transparent valuation process.
• Audit committees (or those charged with governance) must be diligent in their oversight of these processes.
• External auditors must rigorously and skeptically test the valuation information provided by management.

Third-party valuation advisors provide added rigor in the valuation process by validating the issuer’s approach. An independent party can improve the quality of valuation inputs, enhance the oversight during the process, and support a robust audit process with strong documentation.