Valuations and changingexchange rates

AUD Exchange Rates since 2000

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

0.00

0.20

0.40

0.60

0.80

1.00

1.20

US$UK£

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 Salesnote: 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 $41,100Sotheby’s New York 1 Feb 2011 US$32,000 $32,200Bonham’s London 1 Dec 2012 £22,000 $34,300Rare Book Dealer Los Angeles 1 Nov 2013 US$34,000 $35,800 CGP Valuation Valuer 1 $36,500

Comparable Salesnote: 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 paintingnote: 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 paintingnote: 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