AICPA unveils new valuation standard

Over the past 20 years, the demand for valuation services has increased significantly among businesses, attorneys, bankers and other stakeholders, and CPAs have responded by offering services.

To enhance the consistency and practice quality of CPAs who perform engagements that estimate values, the AICPA has issued Statement on Standards for Valuation Services No. 1 (SSVS No. 1), “Valuation of a Business, Business Ownership Interest, Security or Intangible Asset.”

The new standard provides CPAs with professional guidance that encourages consistency, transparency, communication, structured service levels, and well-defined reporting options. By establishing consistency and best practices, the new standard also benefits those who rely on valuation services, such as CPA clients, courts, government agencies and regulators.

Standard applies to many disciplines

SSVS No. 1 applies to AICPA members who perform engagements that estimate the value of a business, business interest, security or intangible asset for numerous purposes such as sales transactions, financing, taxation, financial reporting, mergers and acquisitions, management and financial planning, and litigation.

Although the standard is effective for engagements accepted on or after Jan. 1, 2008, the AICPA encourages earlier adoption.

The standard also benefits CPAs by providing a set of guidelines in the unique context of a CPA practice. By offering professional guidance on generally accepted “best practices” within the valuation and business communities, the standard promotes consistent practice among CPAs performing valuation services as well as adequate disclosures for users of the services. It also reduces uncertainty as to what type of analyses and/or content of reports are appropriate.

Unless a specified exemption applies, CPAs, regardless of discipline, should follow SSVS No. 1 whenever they perform an engagement or any part of an engagement that estimates a value resulting in an expression of either a conclusion of value or a calculated value.

Additional benefits of SSVS No. 1

In addition to providing guidance, the standard will help CPAs in other ways. For example:

If called to defend valuation work during a challenge, CPAs will have the assurance that their analysis and report are prepared in accordance with SSVS No. 1.
CPAs and clients benefit from a common vocabulary. The standard adopts a glossary and a set of valuation terminology that allows CPAs to more effectively and efficiently communicate with each other, with non-CPA valuation analysts, with clients and with other parties who rely on valuation reports.
CPAs may rely on SSVS No. 1 for professional guidance regarding what are considered generally accepted valuation approaches.
SSVS also provides guidance on the type of financial and non-financial documents and documentation that CPAs should consider in the valuation process.

CPAs can access a copy of SSVS No. 1, as well as several implementation tools, on the AICPA BVFLS Web site at www.aicpa.org/bvstandard. In addition, CPAs may send questions about the standard to the AICPA at SSVS@aicpa.org.

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