OT30310 - Capital Gains

Valuation of Oil Assets (including shares). Principles of Valuation. Information Available at the Valuation Date.

A valuation for a particular date should not be made on the basis of hindsight, but only on the basis of the information which

• was available, or
• could have been made available at that date.

However, a valuation which is put forward may be considered in the light of subsequent events. For example, an asset which is valued at £15,000 at 31 March 1982 is sold for £10,000 in October 1990. There may be a good reason why the value of the asset has declined between 1982 and 1990, but, with the effect of inflation, you would expect it to have risen. It is reasonable to ask why the asset declined in value. On the other hand, it would be wrong to assume that the value at 31 March 1982 must be too high simply because of the low sale price.

It should also be noted, that depending on factors such as the oil price and the actual stage of development a licence is a depreciating asset for capital gains tax.