Nobles Crus - a Case on Wine Valuation

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NOBLE CRUS
A Case on Wine Valuation

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Background

Reasons for investing in fine wine: * As an investment in future drinking – buying young wines which will improve over time. * As a financial investment – buying wines with the sole intention of reselling them later for a profit.
The global demand for fine wine has increased enormously over the last few decades. Wine as a financial asset outperformed benchmarks such as Dow Jones, FTSE 100 etc, and offered spectacular returns. It also offered stability against volatility of the Stock Market.
Stake holders
The prices of wine are a key topic for market participants interested in valuation of wine funds. Dealers, restaurants and consumers interested in optimizing their wine purchases also show interest in accurate pricing mechanisms. Measuring performance of wine investment funds is also linked to remuneration and bonuses of managers, assessment of fair value of a share in the fund, and, more generally, accurate reporting to all stakeholders involved. As a closely related issue, regular re-valuation becomes an essential element of accurate valuation of a stock. Managers of wine funds are generally entrusted with these valuations. In this case, fair-value measurement is compulsory by law. In the next section we will discuss the available methods of valuation and also a newly emerging quantitative method aimed at meeting IFRS 13 compliance for fair valuation.

Transition from traditional valuation to IFRS 13 and wine funds versus other funds

Traditional valuation of physical assets by independent appraisers is slowly rendered obsolete by increasing access to data and automation capabilities. Furthermore, the growing level of stocks held by wine funds makes a regular very difficult to achieve. As the ‘manual’ evaluation gradually became difficult, new methods emerged, and as a consequence, the adoption of IFRS 13 (effective since January 2013) by

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