A Presentation and Discussion on theAmerican Institute of Certified Public AccountantsStatement on Standards for Valuation Services No. 1 : A Presentation and Discussion on the American Institute of Certified Public Accountants Statement on Standards for Valuation Services No. 1 'Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset'
AICPA Statement on Standards for Valuation ServicesPresentation and Discussion Outline : AICPA Statement on Standards for Valuation Services Presentation and Discussion Outline Purpose and objective of this presentation
Purpose, objective, and benefits of the Statement on Standards for Valuation Services ( 'SSVS No. 1' or the 'Statement')
History of the development and approval of SSVS No. 1
SSVS No. 1 valuation terminology
Application of the Statement to client engagements
Business valuation (BV) engagement acceptance considerations
BV engagement analysis requirements
Valuation approaches and methods
BV engagement reporting requirements
Other contents of the Statement
Summary and conclusion; questions and discussion
AICPA Statement on Standards for Valuation ServicesIntroductory Comments : AICPA Statement on Standards for Valuation Services Introductory Comments Introduction of the presenter
On behalf of the AICPA business valuation (BV) committee, we are pleased to present SSVS No. 1
The results of many years of debate and development, the Statement will benefit
all AICPA members
all AICPA BV practitioners
all AICPA member valuation clients
the general business valuation profession
Members performing tax-related valuations that must comply with IRS 'qualified appraisal' regulatory requirements
courts, regulators, taxing authorities, investors, and others who rely on business valuations
This presentation will discuss both the conceptual foundation and the practical application of the Statement
We want this presentation to be as informative as possible; we encourage your questions and discussion
AICPA Statement on Standards for Valuation ServicesPurpose and Objective of this Presentation : AICPA Statement on Standards for Valuation Services Purpose and Objective of this Presentation We want to accomplish the following objectives:
to explain why the Statement was issued (i.e., the SSVS benefits)
to explain how the Statement was developed and approved
to explain what the Statement is intended to do
to explain when the Statement does (and does not) apply
to explain the terminology used in the Statement
to explain how the Statement affects planning for the BV engagement
to explain how the Statement affects performing the BV engagement
to explain how the Statement affects reporting on the BV engagement
We want you to understand what the Statement means to you
AICPA Statement on Standards for Valuation ServicesPurpose and Objective of SSVS No. 1 : AICPA Statement on Standards for Valuation Services Purpose and Objective of SSVS No. 1 Business valuations are performed for purposes of:
transactions – bankruptcy
financings – management planning
taxation – litigation support
financial accounting – other
All AICPA members will follow the Statement when they perform an engagement to estimate a value that results in an expression of:
a conclusion of value – a calculated value
The Statement is intended to:
provide AICPA members with professional guidance
represent 'best practices' in BV services
improve the consistency and quality of BV practice
improve the transparency and replicability of BV reports
AICPA Statement on Standards for Valuation ServicesHistory of the Development of SSVS No. 1 : AICPA Statement on Standards for Valuation Services History of the Development of SSVS No. 1 The Statement development process started in 2001
An AICPA BV committee standard writing task force was involved in the SSVS development for a 6-year period
Numerous AICPA BV practitioners were consulted for input
The first exposure draft was issued in 2005
The revised exposure draft was issued in 2006
The Statement was issued in 2007
The Statement is effective for all members who accept an engagement to estimate value after January 1, 2008
AICPA Statement on Standards for Valuation ServicesHistory of the Development of SSVS No. 1 : AICPA Statement on Standards for Valuation Services History of the Development of SSVS No. 1 The following AICPA groups were consulted in the development of the Statement:
Tax Executive Committee
SSARS Committee
Auditing Standards Committee
Members in Industry Committee
PFP Executive Committee
PCPS Executive Committee
Business Valuation Committee
Forensic andamp; Litigation Committee
Consulting Services Executive Committee
BV/FLS Executive Committee
AICPA General Counsel
AICPA Statement on Standards for Valuation ServicesExpected Member Benefits from the Application of SSVS No. 1 : AICPA Statement on Standards for Valuation Services Expected Member Benefits from the Application of SSVS No. 1 The Statement provides professional guidance as to generally accepted 'best practices' within the valuation community. The Statement reduces member uncertainty as to what level of analyses and/or what content of reports are appropriate.
In defending the valuation work during a contrarian challenge, the member will have the assurance that his or her analysis and report are prepared in accordance with the Statement.
Members should benefit from a common vocabulary. The Statement adopts a glossary and a set of valuation terminology that should allow members to more effectively and efficiently communicate with (1) each other, (2) other (non-CPA) valuation analysts, (3) clients, and (4) other parties who rely on valuation reports.
Members may rely on the Statement for professional guidance with regard to what are (and who are not) considered generally accepted valuation approaches and members.
Members may rely on the Statement for professional guidance with regard to the type of documents and documentation (both financial and non-financial) that should be considered in the valuation process.
Valuation analysts who provide certain tax-related valuations must comply with 'generally accepted appraisal standards' as mandated by the Pension Protection Act of 2006; the Statement provides a benchmark for such regulatory compliance.
AICPA Statement on Standards for Valuation ServicesExpected Client Benefits from the Application of the SSVS : AICPA Statement on Standards for Valuation Services Expected Client Benefits from the Application of the SSVS Clients can reach an unambiguous agreement with the valuation analyst regarding the level of valuation service to be performed in the engagement. The statement provides for well-defined alternative types of valuation development analyses.
Clients can reach an unambiguous agreement with the valuation analyst regarding the type of valuation report to be provided. The Statement provides for several well-defined alternative types of valuation reports.
The client (or other report reader) should be able to (1) replicate the data sources and the valuation approaches, methods, and procedures and (2) duplicate the value conclusion. This does not mean that the client (or another report reader) will always agree with the value conclusion; analyst judgment plays a large part in the selection of valuation variables.
There should be transparency in the valuation analysis and in the valuation report. This transparency should increase the client’s confidence in the valuation process and in the value conclusion.
Clients should benefit from both increased consistency and comparability between different analyst’s valuation reports. As members produce valuation reports with the same general content and disclosures, it will be easier for clients to comprehend and compare valuation reports.
For tax-related valuations, clients can be assured that member-prepared valuations comply with 'generally accepted appraisal standards' as required by the Pension Protection Act of 2006.
AICPA Statement on Standards for Valuation ServicesSSVS Valuation Terminology : AICPA Statement on Standards for Valuation Services SSVS Valuation Terminology The Statement adopts the International Glossary of Business Valuation Terms
Some additional terms specific to the Statement are defined below
Calculated value – An estimate as to the value of a business, business ownership interest, security, or intangible asset, arrived at by applying valuation procedures agreed upon with the client and using professional judgment as to the value or range of values based on those procedures
Calculation engagement – An engagement to estimate value wherein the valuation analyst and the client agree on the specific valuation approaches and valuation methods the valuation analyst will use and the extent of valuation procedures the valuation analyst will perform to estimate the value of a subject interest. A calculation engagement generally does not include all of the valuation procedures required for a valuation engagement. If a valuation engagement had been performed, the results might have been different. The valuation analyst expresses the results of the calculation engagement as a calculated value, which may be either a single amount or a range.
AICPA Statement on Standards for Valuation ServicesSSVS No. 1 Valuation Terminology : AICPA Statement on Standards for Valuation Services SSVS No. 1 Valuation Terminology Conclusion of value – An estimate of the value of a business, business ownership interest, security, or intangible asset, arrived at by applying the valuation procedures appropriate for a valuation engagement and using professional judgment as to the value or range of values based on those procedures.
Engagement to estimate value – An engagement, or any part of an engagement (for example, a tax, litigation, or acquisition-related engagement), that involves determining the value of a business, business ownership interest, security, or intangible asset. Also known as valuation service.
Valuation analyst – For purposes of this statement, an AICPA member who performs an engagement to estimate value that culminates in the expression of a conclusion of value or a calculated value.
Valuation engagement – An engagement to estimate value in which a valuation analyst determines an estimate of the value of a subject interest by performing appropriate valuation procedures as outlined in the Statement and is free to apply the valuation approaches and methods he or she deems appropriate in the circumstances. The valuation analyst expresses the results of the valuation engagement as a conclusion of value, which may be either a single amount or a range.
AICPA Statement on Standards for Valuation ServicesApplication of SSVS No. 1 : AICPA Statement on Standards for Valuation Services Application of SSVS No. 1 The Statement applies to any AICPA member:
who is engaged to estimate the value of a business, business ownership interest, security, or intangible asset (collectively the 'subject interest')
An engagement to estimate value may result in either:
a conclusion of value, or
a calculated value
A member who performs such an engagement is referred to as a 'valuation analyst.'
AICPA Statement on Standards for Valuation ServicesApplication of SSVS No. 1 : AICPA Statement on Standards for Valuation Services Application of SSVS No. 1 The Statement does not apply in these situations:
the value of the subject interest is provided to the member by the client or a third party and the member (1) does not apply valuation approaches and methods and (2) does not report on the value of the subject interest
the member performs an engagement to calculate value as part of an audit or review engagement
internal use assignments from employers to employee members not in the practice of public accounting
engagements that are exclusively for the purpose of determining economic damages (unless that determination is also used to estimate the value of a subject interest)
mechanical computations that do not rise to the level of engagement to estimate value (i.e., where the member does not apply valuation approaches and methods and use professional judgment)
where it is not practical or reasonable for the member to obtain or use relevant information and the member is unable to apply valuation approaches and methods
A jurisdictional exemption, when the Statement differs from published governmental judicial or accounting authority
AICPA Statement on Standards for Valuation ServicesValuation Engagement Considerations – Competence : AICPA Statement on Standards for Valuation Services Valuation Engagement Considerations – Competence AICPA Code of Professional Conduct Rule 201A applies:
A member must have the professional competence to perform any client service
Performing a valuation engagement with professional competence involves special knowledge and skill
A valuation analyst should possess (1) a level of knowledge of valuation principles and theory and (2) a level of skill in the application of such principles that will enable him or her to:
(a) identify, gather, and analyze the necessary data,
(b) consider and apply the appropriate valuation approaches and methods, and
(c) use professional judgment in developing the estimate of value
AICPA Statement on Standards for Valuation ServicesValuation Engagement Considerations—Minimum Considerations Before Accepting the Engagement : AICPA Statement on Standards for Valuation Services Valuation Engagement Considerations— Minimum Considerations Before Accepting the Engagement In determining his/her professional competence, the valuation analyst should consider:
Subject entity and subject industry
Subject interest
Valuation date
Scope of the valuation engagement, including
Purpose of the valuation
Any assumptions and limiting conditions
Applicable standard of value
Type of report to be issued
Intended use and users
Restrictions on the use of the report
Governmental regulations or other professional standards that apply to the engagement
AICPA Statement on Standards for Valuation ServicesValuation Engagement Considerations—Member Objectivity and Independence : AICPA Statement on Standards for Valuation Services Valuation Engagement Considerations— Member Objectivity and Independence Objectivity is required in all professional services; the valuation analyst must comply with:
AICPA Code of Professional Conduct Rule 102 'Integrity and Objectivity'
Obligation for the valuation analyst to be impartial, intellectually honest, disinterested, and free of conflicts of interest
So as not to impair the member’s independence with respect to the client in an attest engagement, the valuation analyst must comply with:
AICPA Code of Professional Conduct Rule 101 'Independence'
Rule 101 Interpretation No. 101-3 'Performance of Nonattest Services'
AICPA Statement on Standards for Valuation ServicesValuation Engagement Considerations—Other Engagement Considerations : AICPA Statement on Standards for Valuation Services Valuation Engagement Considerations— Other Engagement Considerations Valuation analyst should establish an understanding with the client
Can be oral (with workpaper documentation) or written
Scope restrictions on the valuation analyst’s work or on data availability
Must be disclosed in the valuation report
Use of the work of specialists
Valuation analyst may rely on third party specialists such as real estate or equipment appraisers
Valuation analyst should disclose (in the assumptions and limiting conditions report section) the level of responsibility for the work of third party specialists
The valuation analyst should also comply with the professional requirements of any other BV organization in which he/she is a member
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Two Types of Engagements : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Two Types of Engagements The Valuation Engagement
This engagement calls for the valuation analyst to estimate the value of the subject interest
Valuation analyst follows the development section of SSVS No. 1 and is free to apply the appropriate valuation approaches
Results are expressed as a 'conclusion of value'—either as a single amount or a range of values
The Calculation Engagement
Valuation analyst and client agree on (1) the valuation approaches and methods to use and (2) the extent of procedures to perform
Valuation analyst calculates value using the agreed upon procedures
Results are expressed as a 'calculated value'—either as a single amount or a range of values
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Hypothetical Conditions : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Hypothetical Conditions Hypothetical conditions may be required in some circumstances
Hypothetical conditions may apply to both (1) valuation engagements and (2) calculation engagements
Valuation analyst should (1) indicate the purpose of the hypothetical conditions and (2) disclose these conditions in the valuation report or the calculation report
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Analysis of the Subject Interest : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Analysis of the Subject Interest The minimum information the valuation analyst needs to analyze the subject interest depends on:
Nature of the subject interest
Scope of the valuation engagement
Valuation date
Intended use of the valuation
Applicable standard of value
Applicable premise of value
Any assumptions and limiting conditions
Applicable government regulations or other professional standards
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Nonfinancial Information : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Nonfinancial Information The valuation analyst should obtain sufficient nonfinancial information to understand the subject interest, including:
Nature, background, and history of the entity (or intangible asset)
Facilities of the entity
Organizational structure
Management team (officers, directors, and key employees)
Classes of equity ownership and their applicable rights
Products and/or services
Economic environment
Industry markets
Key customers and key suppliers
Competition
Business risks
Business strategy and future plans
Governmental or regulatory environment
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Ownership Information : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Ownership Information The valuation analyst should obtain and analyze sufficient ownership information in order to:
Determine the type of ownership interest and whether it is a control, majority, or minority ownership interest
Analyze the ownership interests of other owners and their impact on the value of the subject interest
Understand the classes of ownership interest and the rights assigned thereto
Understand the rights included in, or excluded from, each intangible asset
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Ownership Information (continued) : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Ownership Information (continued) The valuation analyst should obtain and analyze sufficient ownership information in order to:
Understand any other matters that may affect value, such as:
For business interests
Shareholder agreements
Partnership agreements
Operating agreements
Voting trust agreements
Buy-sell agreements
Loan covenants
Restrictions and other contractual obligations
For intangible assets
Licensing agreements
Sublicense agreements
Nondisclosure agreements
Development rights
Commercialization or exploitation rights
Other obligations
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Financial Information : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Financial Information The valuation analyst should obtain and analyze applicable and available financial information, such as:
Historical financial information and key financial ratios and statistics
Prospective financial information
Comparative summaries of financial statements or other information
Common size financial statements
Comparative size industry financial information
Income tax returns
Owner compensation, including benefits and personal expenses
Key person or officer life insurance
Information on advantageous or disadvantageous contracts
Contingent or off-balance sheet assets or liabilities
Prior sales of the subject entity interests (or intangible asset)
The valuation analyst should read and evaluate the information in order to determine if it is reasonable for purposes of the engagement
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Other Engagement Considerations : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Other Engagement Considerations Conclusion of value
Correlate, reconcile, and assess the reliability of the results from different valuation approaches and methods
Determine whether the value conclusion should be based on one method or on a combination of methods
Subsequent events
Defined as: an event that occurs subsequent to valuation date but prior to issuance of valuation report
The valuation analyst should consider two types of subsequent events:
Analyst should consider events indicative of conditions that are known or knowable on the valuation date
Analyst should not consider (but may disclose) events that are not indicative of conditions that are known or knowable on the valuation date
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Other Engagement Considerations (continued) : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Other Engagement Considerations (continued) Valuation engagement documentation may include:
Information gathered and analyzed
Any assumptions and limiting conditions
Any restrictions on the scope of work or the availability of data
The basis for any valuation assumptions
Valuation approaches and methods used
Any subsequent events considered
How any 'rule of thumb' was considered
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Other Engagement Considerations (continued) : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Other Engagement Considerations (continued) Calculation engagement considerations include:
Identity of the client
Identity of the subject interest
Ownership control and marketability elements
Purpose and intended use of the calculated value
Intended users of report and any limitations on report use
The valuation date
Applicable standard of value
Applicable premise of value
The sources of information used
Valuation approaches and methods agreed on with client
Any subsequent events
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Valuation Approaches and Methods : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Valuation Approaches and Methods The valuation analyst should use valuation approaches and methods that are appropriate to the engagement
The valuation analyst should consider the three generally accepted valuation approaches:
For business and security valuations
income approach
market approach
asset-based approach
For intangible asset valuations
income approach
market approach
cost approach
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Income Approach Valuation Methods : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Income Approach Valuation Methods In the business valuation capitalization of benefits method (e.g., earnings or cash flow), the valuation analyst should consider:
Normalization adjustments
Nonrecurring revenue and expense items
Income taxes
Capital structure and financing costs
Capital investments
Qualitative judgments for risks considered to compute the discount rate and/or capitalization rate
Any expected changes in future economic benefits
In the business valuation discounted future benefits method (e.g., earnings or cash flow), the valuation analyst should consider:
Any forecast/projection valuation variable assumptions
The forecast/projected earnings and/or cash flow
Estimation of the terminal value
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Income Approach Valuation Methods (continued) : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Income Approach Valuation Methods (continued) For intangible assets, the valuation analyst should also consider:
Remaining useful life
Current and anticipated future use
Attributable rights
Position in its life cycle
Appropriate discount rate
Appropriate contributory asset capital charge, if any
Research andamp; development or marketing expense required to support intangible asset in current state
Allocation of enterprise income (e.g., incremental, residual, or profit-split)
Whether the income tax amortization benefit is appropriate
Discounted multi-year excess earnings
Market-derived royalty rates
Relief from royalty analysis
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Market Approach Valuation Methods : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Market Approach Valuation Methods For a business or security valuation, the valuation analyst should consider:
Guideline public company method
Guideline transactions method
Guideline (historical) sales of ownership interests in the subject entity
For an intangible assets valuation, the valuation analyst should consider:
Comparable uncontrolled transactions method
Comparable profit margin method
Relief from royalty method
The remaining useful life of the subject intangible asset compared to the guideline intangible assets
The valuation analyst should also consider:
Qualitative and quantitative comparisons
Arm’s-length sale/license transactions and prices
Dates and consequent relevance of empirical market data
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Asset-Based Approach Valuation Methods : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Asset-Based Approach Valuation Methods For a business or security valuation, the valuation analyst should consider:
Adjusted net asset method
Excess earnings method
The existence of (1) both tangible and intangible assets and (2) both recorded and contingent liabilities
The value of (1) both tangible and intangible assets and (2) both recorded and contingent liabilities
Asset liquidation costs, as appropriate
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Cost Approach Valuation Methods : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Cost Approach Valuation Methods For an intangible asset valuation, the valuation analyst should consider:
The appropriate measure of cost (e.g., reproduction or replacement)
The appropriate forms of depreciation and functional/economic obsolescence
The remaining useful life estimate
AICPA Statement on Standards for Valuation ServicesConduct of the Valuation Engagement—Other Considerations : AICPA Statement on Standards for Valuation Services Conduct of the Valuation Engagement— Other Considerations Rules of thumb are not an acceptable valuation method but may be used as a reasonableness check
Generally a rule of thumb should not be the only method used to value the subject interest
Consider whether any valuation adjustments should be made to the pre-adjustment value
Discount for lack of marketability
Discount for lack of ownership control
Premium for ownership control
Consider any non-operating assets, liabilities, and any excess/deficient operating assets
Consider the impact of lack of control of these assets/liabilities
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—Valuation Reporting : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— Valuation Reporting A valuation report is a communication to the client containing the conclusion of value or the calculated value of the subject interest
Valuation reports may be written or oral
There is an exemption from the Statement reporting provisions for certain controversy proceedings, whether the matter proceeds to trial or settles before trial
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—Types of Valuation Reports : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— Types of Valuation Reports For a valuation engagement resulting in a conclusion of value:
Detailed report
Summary report
For a calculation engagement resulting in a calculated value:
Calculation report
For both types of engagements:
Oral reports
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Detailed Report : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Detailed Report The detailed report provides all sufficient information to permit report users to understand the data, reasoning, and analyses underlying the value conclusion
The detailed report should include the following sections:
Letter of transmittal
Table of contents
Introduction
Sources of information used
Analysis of the subject entity and related nonfinancial information
Financial statement/information analysis
Valuation approaches and methods considered
Valuation approaches and methods used
Valuation adjustments
Nonoperating assets and liabilities; excess/deficient operating assets
Representation of the valuation analyst
Reconciliation of value estimates and conclusion of value
Professional qualifications of the valuation analyst
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Detailed Report (continued) : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Detailed Report (continued) The introduction section of the detailed report should include:
Identity of the client
Purpose and intended use of the valuation
Intended users of the valuation
Identity of the subject entity
Description of the subject interest
Description of ownership control and marketability characteristics
Valuation date
Valuation report date
Type of report issued (i.e., a detailed report)
Applicable standard of value
Applicable premise of value
Any assumptions and limiting conditions
Any restrictions/limitations on the scope of work or the data availability
Any hypothetical conditions assumed
Description of any specialist’s work relied on and the level of responsibility the valuation analyst assumes for the specialist’s work
Disclosure of any subsequent events
Any jurisdictional exception
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Detailed Report (continued) : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Detailed Report (continued) The detailed report should also include the following sections:
A sources of information description
An analysis of the subject entity and related nonfinancial information
A financial statement/information analysis
A description of valuation approaches and methods considered
A description of valuation approaches and methods used
A description of valuation adjustments
A description of any nonoperating assets and excess assets
A signed representation by the valuation analyst
The professional qualifications of the valuation analyst
A reconciliation of value estimates and a conclusion of value
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Summary Report : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Summary Report Identity of the client
Purpose and intended use of the valuation
Intended users of the valuation
Identity of the subject entity
Description of the subject interest
Subject interest ownership characteristics and degree of marketability
Valuation date
Valuation report date
Type of report issue (i.e., a summary report)
Applicable standard of value
Applicable premise of value
Sources of information used in the valuation
Any assumptions and limiting conditions Any restrictions/limitations on the scope of work or the data availability
Any hypothetical conditions assumed
Description of any specialist's work relied on and the level of responsibility valuation analyst assumes for specialist’s work
Valuation approaches and methods used
Reconciliation of value estimates and conclusion of value
Disclosure of any subsequent events
Any jurisdictional exception
Representation of the valuation analyst
Signature of valuation analyst or analyst’s firm The summary report provides a summary of the information that would be provided in a detailed report
The summary report should include the following:
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Calculation Report : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Calculation Report A calculation report is the only report that should be used to report the results of a calculation engagement
The report should state that it is a calculation report
The calculation report should identify:
Any hypothetical conditions used
Any jurisdictional exception
Any assumptions and limiting conditions
A description of any specialist’s work relied on and the level of responsibility valuation analyst assumes for specialist’s work
A disclosure of any subsequent events
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Calculation Report (continued) : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Calculation Report (continued) The calculation report should summarize the calculated value, including:
Identification of the subject interest
Identification of the calculation date
Valuation report date
Statement that the valuation analyst is not obligated to update the calculation
Description of the calculation procedures performed
Statement that the calculation was performed in accordance with this Statement
Description of the subject interest characteristics, including characteristics of control and marketability
A statement that the estimated value is a calculated value
A general description of the calculation engagement
The calculated value
Signature of the valuation analyst or the valuation analyst’s firm
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—The Oral Report : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— The Oral Report An oral report may be used in either (1) a valuation engagement or (2) a calculation engagement
An oral report should include all information necessary to relate the scope, assumptions, limitations, and results of the engagement
The oral report should limit any misunderstanding between the valuation analyst and the oral report recipient
The valuation analyst should document the substance of the oral report in the engagement workpapers
AICPA Statement on Standards for Valuation ServicesReporting of the Valuation Engagement—Restrictions on Use of the Valuation Report : AICPA Statement on Standards for Valuation Services Reporting of the Valuation Engagement— Restrictions on Use of the Valuation Report The valuation analyst should indicate in the valuation report any restrictions on the use of the report (which may include restrictions on the users of the report, the uses of the report by such users, or both).
The valuation analyst is not responsible for controlling a client’s distribution of a valuation report that has been restricted as to use.
AICPA Statement on Standards for Valuation ServicesSSVS Appendices Content and Intent—Appendix A : AICPA Statement on Standards for Valuation Services SSVS Appendices Content and Intent— Appendix A Presents an illustrative List of Assumptions and Limiting Conditions
Contents
Purpose
AICPA Statement on Standards for Valuation ServicesSSVS Appendices Content and Intent—Appendix B : AICPA Statement on Standards for Valuation Services SSVS Appendices Content and Intent— Appendix B Presents the International Glossary of Business Valuation Terms
Definitions
Adopting Organizations
AICPA Statement on Standards for Valuation ServicesSSVS Appendices Content and Intent—Appendix C : AICPA Statement on Standards for Valuation Services SSVS Appendices Content and Intent— Appendix C Presents a Glossary of Additional Valuation Terms
Definitions
Terms specific to the Statement
AICPA Statement on Standards for Valuation ServicesSSVS Appendices Content and Intent—Appendix D : AICPA Statement on Standards for Valuation Services SSVS Appendices Content and Intent— Appendix D SSVS Interpretation No. 1
'Scope of Applicable Services' of Statement on Standards for Valuation Services
Part of the AICPA continuing efforts at self-regulation of its members engaged in valuation practice
Paragraphs 2 and 3 – General interpretation
Identifies and reiterates excluded items
Paragraphs 6 to 15 – Illustrations relating to litigation engagements and certain controversy proceedings
Paragraphs 16 to 71 – Illustrations relating to tax engagements (e.g., paragraph 66 related to transfer pricing studies)
Paragraphs 72 to 81 – Illustrations relating to other types of engagements
Paragraphs 82 to 89 – Illustrations relating to PFP-specific engagements
AICPA Statement on Standards for Valuation ServicesSummary and Conclusion : AICPA Statement on Standards for Valuation Services Summary and Conclusion Purpose, objective, and benefits of the Statement
Application of the Statement to all AICPA members who accept engagements to estimate value after January 1, 2008
Summary of valuation engagement analysis requirements
the valuation engagement
the calculation engagement
Summary of valuation engagement reporting requirements
the valuation engagement
detailed report
summary report
the calculation engagement
the calculation report
all engagements
the oral report
AICPA Statement on Standards for Valuation ServicesQuestions and Discussion : AICPA Statement on Standards for Valuation Services Questions and Discussion Purpose and objective of this presentation
On behalf of the AICPA BV committee, we appreciate the opportunity to present the Statement
Valuation analysts should also comply with all professional requirements of other valuation organizations of which they are members
Concluding remarks
Discussion
Questions
Comments
Suggestions