Material valuation uncertainty
A short, practical note on material valuation uncertainty, with the public definition from IVS / Red Book (effective 31 January 2025).
In my practice, every valuation carries ordinary uncertainty — it is an estimate. Material valuation uncertainty is different: the uncertainty falls outside what would normally be expected and accepted, for example with a unique asset, very limited information, or a market disrupted by a sudden event. When that happens, the Red Book requires commentary in the report where it is essential for the reader’s clarity. I write it in plain words, say what causes it and what it does to the figure, and I do not use it as boilerplate.
“All valuations are estimates and therefore always subject to a degree of uncertainty. However, this ordinary uncertainty should not be confused with MVU.”
Source: Red Book Global Standards, VPGA 10 Material valuation uncertainty, para 1.2
“[…] where the degree of uncertainty in a valuation falls outside any parameters that might normally be expected and accepted.”
Source: Red Book Global Standards, VPGA 10 para 1.2 (explaining VPS 6 para 2.2(o))
Common confusion
Material valuation uncertainty ≠ a lower value: it says how reliable the figure is, not that the figure is wrong.