Which statement correctly distinguishes an assumption from an extraordinary assumption?
Correct Answer
B) Only the extraordinary kind is assignment-specific and about uncertain facts
An assumption is that which is taken to be true. An extraordinary assumption is assignment-specific and concerns uncertain information as of the effective date that, if false, could alter the opinions or conclusions. A hypothetical condition instead contradicts what is known to exist on the effective date. Classification is separate from the substantive conditions for use and the applicable reporting duties.
Why This Is the Correct Answer
Option B is correct because only an extraordinary assumption is defined as assignment-specific and concerning uncertain information as of the effective date which, if found to be false, could alter the opinions or conclusions. An ordinary assumption is simply something taken to be true.
Why the Other Options Are Wrong
Option A: Every assumption is known to be false as of the effective date of value
Option A says every assumption is known to be false as of the effective date. Something known to be contrary to fact describes a hypothetical condition, not an assumption.
Option C: Assumptions refer only to confidential information that the client provides
Option C limits assumptions to confidential information the client provides. Assumptions are not defined by confidentiality or by their source; they are things taken to be true in the analysis.
Option D: Assumptions refer only to the visible physical characteristics of the property
Option D limits assumptions to visible physical characteristics. Assumptions can concern legal, economic or other matters, and the extraordinary kind often involves information that is uncertain rather than visible.
Uncertain versus known false
An extraordinary assumption concerns something uncertain that might be false; a hypothetical condition concerns something known to be false.
How to use: Ask whether the fact is uncertain or known to be contrary to reality to classify it.
Exam Tip
If an answer describes something known to be false, it is describing a hypothetical condition, not an assumption.
Common Mistakes to Avoid
- -Confusing an extraordinary assumption with a hypothetical condition
- -Thinking assumptions apply only to physical features
- -Defining assumptions by who supplied the information
Concept Deep Dive
Analysis
This question tests the difference between an ordinary assumption and an extraordinary assumption. An assumption is something taken to be true. An extraordinary assumption is assignment-specific and concerns uncertain information as of the effective date that, if false, could change the appraiser's opinions or conclusions.
Background Knowledge
USPAP distinguishes among assumptions, extraordinary assumptions and hypothetical conditions. An extraordinary assumption treats uncertain information as true for a specific assignment, while a hypothetical condition is contrary to what is known to exist on the effective date. Each has its own conditions for use and disclosure requirements.
Real-World Application
An appraiser cannot access a crawl space and has no report on its condition. The appraiser uses an extraordinary assumption that the foundation is sound, discloses it and notes that the value could change if the assumption proves false.
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