The client asked us to prepare a valuation report on extensive land assets in Domodedovo District, just outside Moscow, for their inclusion on an IFRS balance sheet.

Balance-sheet valuation of the income-bearing land and real estate assets under IFR must use 'fair value' as defined by income-based or comparative approaches. Use of a comparative approach was impossible due to the large size of the assets (assets of comparable size had never been listed for sale in Russia, especially in the public domain).

We therefore used an income-based approach. We began by analyzing the nature of the land plots, which differed in quality, location and development potential.

First, we identified areas suitable for residential real estate and prepared financial models for their development. Then we designed a possible marketing plan for plots suitable for low-rise, 'cottage' development without a building contract. The remaining areas were analyzed based on their potential sale as agricultural land.

Finally, we prepared a comprehensive consolidated cash flow, which factored in all parts of the land bank. The model took account of macroeconomic and industrial risks to estimate current value of financial flows.

The analysis was used to prepare a valuation report, which was subsequently audited by Deloitte. Although the primary purpose of our work was valuation, the client also made use of our findings regarding most efficient use of the land bank. Residential real estate has now been built on the land and is selling well.