What is the effect of an extraordinary assumption on the credibility of assignment results?
Correct Answer
B) Results stay credible only if the assumption holds
Why this is correct: An extraordinary assumption is an assignment-specific condition that is taken as fact during the analysis. The credibility of the assignment results is contingent upon that assumption being true. If the assumption is false, the results may not be valid. Why the other choices are wrong: The choice that it removes any obligation to test credibility is incorrect; credibility must still be assessed. The choice that it renders the results credible in every case is wrong; credibility is conditional. The choice that it converts the results into a hypothetical opinion is false; a hypothetical condition deals with a scenario contrary to known fact. Exam tip: Extraordinary assumption = 'If this is true, then my value is credible.'
Why This Is the Correct Answer
An extraordinary assumption is uncertain and would change the conclusions if false, so results developed on it are credible only if the assumption holds — which is why prominent disclosure is required.
Why the Other Options Are Wrong
Option A: It removes any obligation to test credibility
Credibility must still be tested. USPAP requires that use of the assumption still permit a credible result.
Option C: It renders the results credible in every case
An assumption cannot make results credible. It makes them conditional on the assumption's truth.
Option D: It converts the results into a hypothetical opinion
A hypothetical condition is contrary to a known fact. An extraordinary assumption is uncertain rather than known to be false.
Conditional, and Say So Loudly
Conditional, and Say So Loudly. If the assumption fails, so does the conclusion resting on it.
How to use: Ask whether a credible result is still possible. If the uncertainty is too great, the assumption cannot be used at all.
Exam Tip
Prominent disclosure means where a reader will see it — the letter, the certification, the value conclusion — not the standard limiting conditions.
Common Mistakes to Avoid
- -Treating disclosure as making the results unconditional
- -Burying the assumption in boilerplate
- -Using an assumption too uncertain to support a credible result
Concept Deep Dive
Analysis
An extraordinary assumption is uncertain by definition — it is something the appraiser treats as true for the analysis, directly related to the assignment, which would alter the opinions or conclusions if found false. The results developed on that footing are therefore conditional: credible if the assumption holds, and not necessarily credible if it does not. That conditionality is the reason for the disclosure requirements. The assumption must be identified as extraordinary, disclosed prominently rather than buried in boilerplate, and stated so that a reader understands the conclusion depends on it. USPAP adds two further constraints: use of an extraordinary assumption must be required for a reasonable analysis, and it must still be possible to produce a credible result — an assumption so uncertain that no credible conclusion can rest on it cannot be used at all. The distractors err by making the assumption either irrelevant to credibility or a guarantee of it, or by confusing it with a hypothetical condition.
Background Knowledge
An extraordinary assumption is uncertain information directly related to a specific assignment which, if found false, could alter the opinions or conclusions. Its use must be required for a reasonable analysis, must still permit credible results, and must be prominently disclosed.
Real-World Application
An appraiser assuming a pending rezoning will be approved discloses it prominently in the transmittal, the certification and beside the value conclusion.
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