Which description identifies an extraordinary assumption?
Correct Answer
D) An assignment-specific assumption about uncertain facts that matter
An extraordinary assumption concerns assignment-specific information uncertain as of the effective date whose falsity could change the opinions or conclusions. Being assignment-specific alone is insufficient, and a known contrary fact instead indicates a hypothetical condition.
Why This Is the Correct Answer
Option D is correct because USPAP defines an extraordinary assumption as an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser's opinions or conclusions. Option D captures all three elements: assignment-specific, uncertain, and material.
Why the Other Options Are Wrong
Option A: A routine premise that has no effect on the conclusions
Option A describes a routine premise that has no effect on the conclusions. An extraordinary assumption is one whose falsity could alter the opinions or conclusions, so a premise with no effect does not qualify.
Option B: Any premise known to contradict the actual facts on the effective date
Option B describes a premise known to contradict the actual facts on the effective date. That is a hypothetical condition, not an extraordinary assumption, because the information is known rather than uncertain.
Option C: A fact that involves no uncertainty and has no consequence
Option C describes a fact that involves no uncertainty and has no consequence. An extraordinary assumption concerns uncertain information that could matter to the results, so this description fails on both counts.
Uncertain is EA, untrue is HC
If the appraiser does not know whether it is true, it is an extraordinary assumption; if the appraiser knows it is not true, it is a hypothetical condition.
How to use: Use this to sort assumption questions between the two labels quickly.
Exam Tip
Look for the words uncertain and could alter the results; an option describing known contrary facts points to a hypothetical condition instead.
Common Mistakes to Avoid
- -Labeling a premise contrary to known fact as an extraordinary assumption
- -Using the term for routine general assumptions with no effect on results
- -Forgetting that the information must be uncertain as of the effective date
Concept Deep Dive
Analysis
This question tests the definition of an extraordinary assumption. The defining features are that it is assignment-specific, concerns uncertain information as of the effective date, and could alter the opinions or conclusions if false. Distinguish it from a hypothetical condition, which is contrary to known fact.
Background Knowledge
Extraordinary assumptions presume uncertain information to be fact, while hypothetical conditions presume something contrary to known fact. Both are assignment-specific and can affect assignment results. Their use is permitted only under conditions set out in USPAP and must be disclosed in the report.
Real-World Application
An appraiser cannot access a crawlspace and does not know its condition. The appraiser assumes it is free of structural defects as an extraordinary assumption, discloses it, and notes that the value could change if the assumption proves false.
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