Early adoption is optional in the 2026–27 financial year and becomes mandatory from the 2028–29 financial year.
The public sector includes central government, local government and public corporations.
There are many RICS valuation professionals who are employed both internally by public sector organisations and by external consultancies, who specialize in providing independent, impartial valuation and professional property advice across the entire public sector, and where public money or public functions are involved.
This dedicated page brings together useful information for those involved in public sector matters. Whilst most of the content is currently focused on the UK, our hope is to develop this further on a global basis going forward. As a reflection of this, RICS was pleased to co-operate with the International Public Sector Accounting Standards Board in respect of their recent international public sector valuation measurement project.
Professional Standards and Practice Information
Public sector valuer rotation working group – December 2024 final report
This report considers recommendation 3 of the Valuation Review, related to the requirement for valuer rotation (which is the process of changing the responsible valuer and/or firm engaged to undertake valuation services in respect of a particular asset) in the public sector.
The report’s recommendation has been approved by the Standards and Regulation Board, the recently established Valuation Assurance Committee and the Knowledge and Practice Committee.
RICS’ response to HMT’s thematic review of non-investment valuations consultation
With member input, RICS responded to HMT’s thematic review of non-investment valuations which consults on changes that will affect Financial Reporting Manual adaptations and interpretations of the International Accounting Standard 16 relating to property and plant equipment and International Accounting Standard 38 in respect to the measurement of assets. The Treasury was seeking views on alternative valuation options and proposed changes to due process and invited comment on all options presented. You can read the RICS comment here.
HMT response thematic review non- investment valuations consultation (PDF 0.66MB)
Published date: 25 July 2023
Updates on valuer briefings relating to HMT's thematic review of non-investment valuations
Valuers briefing relating to Depreciated Replacement Cost (DRC) as applied to UK public sector asset valuations used for financial reporting purposes: removal of alternative site assumptions
Following the thematic review of non-investment asset valuations by Her Majesty’s Treasury (HMT), public sector asset valuations have undergone important changes. For practical reference, valuers may consult the VOA Valuer Application Guidance, which summarises the key changes introduced by HMT. In particular, the review highlighted the inappropriate use of alternative site assumptions when valuing the land element of operational assets, resulting in valuations that did not properly reflect the cost of replacing the service potential of the asset in its required location.
As a consequence of this review, HM Treasury has amended its guidance (as reflected in the FReM) to remove the ability to assume relocation to a lower-value alternative site when valuing land under DRC. The objective is to ensure that DRC valuations more accurately represent the cost of providing the required public service, rather than a hypothetical or optimised service delivered elsewhere.
This Q and A is intended for valuation teams performing DRC valuations for public sector bodies for financial reporting purposes in the UK and should be applied consistently across relevant instructions.
Q&A: Public sector DRCs for financial reporting: removal of alternative site assumptions
HM Treasury has removed the ability for valuers to assume alternative sites or locations when valuing the land element of a DRC valuation.
Valuers must not assume:
- relocation to a lower-value site elsewhere,
- relocation to a lower-value geographic area, or
- land acquisition outside the area required to deliver the relevant public service.
Yes. Valuers may continue to apply Modern Equivalent Asset (MEA) principles to land, provided the land remains within the required service-delivery geography.
Permitted MEA adjustments include:
- a smaller modern site footprint,
- removal of redundant or surplus curtilage, and
- allowance for modern standards relating to access, circulation, safeguarding and operational efficiency.
Land and buildings must be valued as a single, integrated DRC asset. Where the building is assessed on an MEA basis, the land must also be assessed on an MEA basis, but without reference to a lower-value alternative location.
No. The land must be valued within the geography required to deliver the relevant public service. Alternative locations in lower-value areas are no longer permitted.
All reports with effect from 2028/2029 must include the statement:
“This valuation does not include alternative site assumptions, in accordance with HM Treasury requirements.”
Where early adoption is used, the report should also state:
“This valuation applies the early adoption of HM Treasury’s removal of alternative site guidance (2026–27 FReM).”
If requested, valuers must be able to provide:
- the actual land area,
- the MEA land area, and
- the rationale supporting any land optimisation.
DRC valuations must reflect the cost of providing a modern equivalent asset in the location required to deliver the public service, without assuming hypothetical relocation to lower-value sites, and this approach must be clearly and transparently disclosed in reporting.
Valuers briefing relating to use of indexation in UK public sector asset valuations
Following the thematic review of non investment asset valuations by Her Majesty’s Treasury (HMT), public sector asset valuations have undergone important changes. For practical reference, valuers may consult the VOA Valuer Application Guidance, which summarises the key changes introduced by HMT. One of the principal outcomes was the adoption of a principles-based approach to indexation, allowing asset values to be updated between full market-based valuations, which typically occur on a rolling five-year cycle.
The review recognised that:
- Indexation provides a pragmatic and proportionate approach to maintain up-to-date asset values for financial reporting while controlling costs.
- There is no prescribed index, leaving valuers responsible for selecting appropriate and defensible indices.
- Guidance emphasises consistency, transparency, and professional judgement in the application of indexation.
This Q&A provides practical advice for public sector valuers on applying indexation, selecting indices, and meeting auditor expectations, along with highlighting other useful references.
Q&A: Indexation in Public Sector Asset Valuations
Indexation updates asset values between full market-based valuations, ensuring financial statements remain current without requiring annual full valuations. Assets due for full five-yearly valuations must still be revalued using standard market-based methods, while others may be updated using an appropriate index.
CIPFA Bulletin 22 – Indexation: Application Guidance provides the current authoritative guidance for updating the values of public sector assets between full market-based valuations. It sets out:
- The principles for selecting an appropriate index for different asset types
- The requirement for consistent application year-on-year
- The need for transparent documentation and disclosure of the approach adopted.
While the Bulletin does not prescribe a specific index, it identifies potential sources such as BCIS indices, sector-specific indices, and other observable, defensible indices. The guidance ensures that indexation remains principles-based, auditable, and appropriate for the asset class.
No. HMT and CIPFA deliberately do not prescribe a single index. The choice of index is left to professional judgement, provided it is:
- Appropriate for the asset type
- Consistently applied year-on-year
- Clearly documented and disclosed.
Potential sources include:
- BCIS indices (general or asset-specific)
- Sector-specific indices (e.g., education, leisure, sports facilities)
- Published land or agricultural indices
- Other reputable, observable indices with a defensible link to asset type.
General inflation measures such as RPI or CPI are generally less suitable for property valuations.
- Assets due for a full five-yearly valuation: Revalue using standard market-based methods.
- Assets not due for full revaluation: Update values using a suitable index, applied consistently and documented in accordance with CIPFA Bulletin 22.
- BCIS indices – widely used for cost-based valuations
- CBRE UK Commercial Property Index – tracks capital and rental value movements, as well as total returns across commercial sectors
- JLL sector research – provides data on commercial property trends
- Other sector-specific indices – e.g., Sport England for leisure, S&P for agricultural land
The critical factor is a clear link between the index and the asset type, with consistent application and robust documentation suitable for audit review.
- A rationale linking the chosen index to the asset type
- Consistency of application year-on-year
- Transparent documentation and disclosure
- Indexation should only be applied to assets not undergoing full valuation in the relevant year