Valuations and Changing Exchange Rates Study
Explore the impact of changing exchange rates on valuations through two case studies involving valuable purchases and donations over time, highlighting the importance of understanding currency fluctuations in financial transactions.
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Presentation Transcript
Valuations and changing exchange rates
AUD Exchange Rates since 2000 1.20 1.00 0.80 0.60 US$ UK 0.40 0.20 0.00
Case Study 1 Mr Green purchased a rare book from an American dealer on 1 July 2000 for US $27,000 . He wishes to make a CGP donation to an Australian library on dated 1 March 2015. Since 2000, there has been a modest but steady increase in the value of the book in U.S. and U.K. markets.
Comparable Sales note: converted at exchange rate as at date of sale Place and Date of Sale Purchase Price Converted to AUD at date of each sale Initial purchase price 1 July 2000 US$27,000 $41,100 Sotheby s New York 1 Feb 2011 US$32,000 $32,200 Bonham s London 1 Dec 2012 22,000 $34,300 Rare Book Dealer Los Angeles 1 Nov 2013 US$34,000 $35,800 CGP Valuation Valuer 1 $36,500
Comparable Sales note: converted at exchange rate as at date of valuation Place and Date of Sale Purchase Price Converted to AUD at date of valuation 1 March 2015 Initial purchase price 1 July 2000 US$27,000 $34,600 Sotheby s New York 1 Feb 2011 US$32,000 $41,140 Bonham s London 1 Dec 2012 22,000 $42,600 Rare Book Dealer Los Angeles 1 Nov 2013 US$34,000 $43,700 CGP Valuation Valuer 2 $45,000
GST considerations On arrival in Australia, the book attracted 10 % GST calculated on AU$41,100, ie. $4,100 Therefore his total purchase price was AU$45,100
CGP forms state that the sales prices quoted must be GST inclusive Thus in the scenarios given above, the CGP valuation should either be: $36,500 + 10% = $40,150 or $45,000 + 10% = $49,500
Case Study 2 Mrs White, a wealthy collector and generous donor to a particular Australian institution. Mrs White died in 2012 and her children decided to donate her entire collection as a CGP to her preferred Australian institution in 2013. Donation included one painting purchased in London for 100,000 or AU$285,000. There was also GST paid on landing in Australia, giving a total of $314,250.
Sale of comparable painting note: converted at exchange rate as at date of sale Place and date of sale Price including buyer s premium Converted to AUD Mrs White s purchase at Christie s 2001 100,000 $285,000 Comparable painting sold Sotheby s 2010 100,000 $170,000 CGP valuation Valuer 1 $227,500
Sale of comparable painting note: converted at exchange rate as at date of valuation 1 July 2013 Place and date of sale Price including buyer s premium Converted to AUD Mrs White s purchase at Christie s 2001 100,000 $161,000 Comparable painting sold Sotheby s 2010 100,000 $161,000 CGP Valuation Valuer 2 $161,000
GST Considerations Valuer 1 argued that 10% GST was applicable. Their final valuation was $250,250. Valuer 2 didn t add GST. Their final valuation was $161,000.
Exchange Rate Discussion Points Managing donor expectations Managing Auditor expectations
