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.
Three of the major elements required in the statement on standards for valuation services
(SSVS) are...
Professional Competence – "A valuation analyst should possess a level of knowledge of
valuation principles and theory and a level of skill in the application of such principles that
will enable him or her to identify, gather, and analyze data, consider and apply appropriate
valuation approaches and methods, and use professional judgment in developing the estimate
of value (whether a single amount or a range)" (AICPA, 2007).
Establishing an Understanding with the Client – "The valuation analyst should establish an
understanding with the client, preferably in writing, regarding the engagement to be
performed. If the understanding is oral, the valuation analyst should document that
understanding by appropriate memoranda or notations in the working papers" (AICPA, 2007).
Objectivity and Conflict of Interest – "Objectivity is a state of mind. The principle of
objectivity imposes the obligation to be impartial, intellectually honest, disinterested, and free
from conflicts of interest. Where a potential conflict of interest may exist, a valuation analyst
should make the disclosures and obtain consent as required by the “Conflicts of Interest"
interpretation under the “Integrity and Objectivity Rule” (AICPA, 2007)
The SSVS elements are very similar to those of other standard setting bodies because they all
strive to provide guidelines/rules as well as improve the consistency and quality of a practice.
These elements allow for consistent and comparable reporting.
The first element that I chose is Professional Competence, the “General Standards Rule” of
the code (ET sec. 1.300.001 and 2.300.001) states that a member shall "undertake only those
professional services that the member or the member's firm can reasonably expect to be
completed with professional competence." If you aren't skilled to do the task then don't do it.
The second element I chose is Nature and Risks of the Valuation Services and Expectations of
the Client "To understand the nature and risks of a perspective valuation engagement and the
expectations of the client, the CPA should consider the following: Terms of the engagement,
client identity, nature of the business and ownership rights, procedural requirements of the
engagement, the use of and limitations value report, and any obligation to update the
valuation in the future." The last element I chose is Assumptions and Limiting Conditions For
example: "1) arriving at a conclusion of value while assuming that the current level of
management expertise and effectiveness will be maintained, or 2) relying on management’s
financial statements without any verification of their accuracy and integrity".
The major elements required in the statement on standards for valuation services will include
professional competence, independence, and valuation, and using the work of specialists in
the engagement to estimate value. The professional competence makes sure the members will
finish all their jobs as specialists. The person must have a good level of skill in identifying
and analysing data. The ability of judgment is very important too, so the person can make a
correct report on the client. Last, the person must know all the regulations from the
government. Independence and valuation will make sure the member and the client will have
no connection. If there is any connection or relationship between the member and the client,
the member must provide information in the report. The independence of the client will affect
the report's quality. Using the work of specialists in the engagement to estimate value will
help the member to create a current report in some specific industry. A specialist can find the
true value of a product or an object with special knowledge. The member has to remember to
put down the percentage of the specialist's work in the report. It can help readers have a better
understanding of the report.
The SSVS is created for AICPA members to make sure the company can provide the same
level of service to all clients. SSVS has covered most areas. It may not cover all government
standards. If the stander is required by the government, members must put government
stander as priority.
Three of the major elements required in the statement on standards for valuation services
(SSVS) are professional competence, objectivity and conflict of interest, and establishing an
understanding with the client.
Professional Competence: Professional competence means that the CPA can handle their
duties and are subject matter experts. Performing a “valuation engagement with professional
competence involves special knowledge and skill” (AICPA.org, 2015).
Objectivity and Conflict of Interest: Objectivity means to be free from conflicts of interest,
not interested, and honest. If there is a conflict of interest, the analyst needs to disclose and
obtain consent to move forward (AICPA.org, 2015).
Establishing an Understanding with the Client: From the start of a valuation, the analyst
should establish an understanding with their client. This should be in a written format, but if
not an oral understanding is fine as long as the analyst documents the understanding. As the
valuation goes on, the understanding can be modified depending on what they come across
(AICPA.org, 2015).
SSVS is like other standards as they set guidelines to ensure consistent, honesty, and
accounting practices are being followed properly.
The Statement on Standards for Valuation Services, Valuation of a Business, Business
Ownership Interest, Security, or Intangible Asset (“VS Section 100” or “SSVS”) was issued
by the AICPA Consulting Services Executive Committee in June 2007 for engagements
accepted on or after January 1, 2008. AICPA members* are required to follow VS Section
100 when they perform engagements to estimate value that culminates in the expression of a
conclusion of value or a calculated value. The standard is intended to provide guidelines for
developing estimates of value and reporting on the results.
http://archives.cpajournal.com/2008/608/essentials/p54.htm
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
Statement on standards for valuation services (VS Section 100). AICPA. (2015). Retrieved
June 27, 2022, from https://www.aicpa.org/resources/download/statement-on-standards-for-
valuation-services-vs-section-100
