Three major elements that are required in the statement on standards for valuation services
(SSVS) are:
Professional Competence
A valuation analyst should only elect to provide a professional service that they can
complete in an appropriate manner. According to the American Institute of Certified
Public Accountants (AICPA), “Performing a valuation engagement with professional
competence involves special knowledge and skill.” (AICPA, 2007) It is an ethical
imperative that the valuation analyst is accepting of their skill and knowledge in data
analytics, valuation methods, and professional judgment—and only provide the services
they are professionally able to handle.
Establishing an Understanding With the Client
To help prevent the possibility of misinterpretation of expectations, a valuation analyst
needs to “establish an understanding with the client, preferably in writing, regarding the
engagement to be performed.” (AICPA, 2007) This understanding should include the
“nature, purpose, and objective of the valuation engagement”, as well as the
responsibilities of all parties. Also included should be the assumptions and limiting
conditions, type of report, and standard of value used (AICPA, 2007). If the analyst
encounters situations that change parts of the established understanding, the analyst
needs to modify the understanding.
Assumptions and Limiting Conditions
Tied in with the understanding with the client are assumptions and limiting conditions,
which are common and should be disclosed in the valuation report. Some examples of
assumptions and limiting conditions are that the valuation report is only valid as of the
date of valuation, guarantees of meeting results forecasted are not made, information
provided by the company has not been audited by the valuation analyst and is being
used with the assumption of accuracy, and that the conclusion of value is made with the
assumption that the current management expertise and experience will continue (AICPA,
2007).
In a standards comparison chart issued by the National Association of Certified Valuators and
Analysts (NACVA), it can be clearly seen that most standards for valuation are similar across
many standard-setting bodies. The chart lists standards of the NACVA compared to the Institute
of Business Appraisers, Uniform Standards of Professional Appraisal Practice adopted by
Congress, American Society of Appraisers, and the American Institute of Certified Public
Accountants. All three element examples listed above are standards issued by all groups. The
standards that are in place for all groups cover virtually the same issues—creating similar ethical,
developmental, and reporting standards to meet the needs of evaluators and clients (NACVA,
2017). While there are minor differences in reporting methodologies, the core standards are the
same across most standard-setting bodies.
References:
AICPA.org. (2007, June). Statement on standards for valuation services (VS Section 100).
AICPA.org. Retrieved from https://www.aicpa.org/resources/download/statement-on-
standards-for-valuation-services-vs-section-100
NACVA Standards Board. (2017, June 1). Business Valuation/Appraisal Standards Comparison
Chart. NACVA. Retrieved from http://web.nacva.com/TL-Website/PDF/StandardsChart-
B%20FINAL.pdf
