Three SSVS elements are:
Professional Competence:
An analyst should have a degree of knowledge of valuation principles and the skills necessary
to be able to identify, gather, and analyse the data using various valuation approaches and
methods. An analyst should be able to use professional judgment for developing the estimate
of value of a company. They should consider things such as the subject entity and industry,
subject interest, valuation date, and scope of the valuation engagement to include purpose of
valuation engagement, applicable standard or premise of value standard, type of report to be
produced as well as any federal regulations or applicable professional standards that apply to
the subject interest.
Objectivity and Conflict of Interest:
The analyst needs to be objective, with no bias towards the company or the prospected
valuation report. Objectivity is a mindset the analyst must have to ensure they are impartial,
intellectually honest, and free from conflicts of interest that could skew their valuation of the
company. They should follow the Integrity and Objectivity rule.
Using the Work of Industry Specialists:
An analyst will from time to time need to rely on the work of an expert in the industry they
are doing a valuation for. For example, if they are trying to value a car dealership, they may
pull in a car appraiser to verify the values of the cars are what they should be on paper. By
taking into account these third-party specialists, they can ensure their values are best aligned
with fair market values. The analyst can include the third party’s written report as part of their
own report or at minimum must note the limiting conditions and level of responsibility being
assumed by them on the final valuation report.
The SSVS does a good job of outlining the qualifications, guidelines to be followed, and
different methods that can be used to provide a fair valuation of a company. Other standard
setting bodies have similar guidelines and practices in place to maintain consistency in their
own specific processes and reports provided.
Professional Competence – In order to provide services to a client one needs the knowledge
and skills for the given task (AICPA, 2007). All interactions and services should be provided
in a professional manner with the valuation analyst using their resources to approach the
problem in an efficient manner.
Objective and Conflict of Interest – Providing service should be free from bias, and remain
honest (AICPA, 2015). Remaining uninterested personally creates the ability to create a
valuation objectively.
Establishing an Understanding with the Client – A valuation analyst needs to provide a clear
understanding with the client traditionally in writing. The written understanding should
include the purpose, the objective, and the nature of the valuation (AICPA, 2007). Having a
clear understanding provides clarity to both parties on expectations.
The standards provided but the SSVS fall in line with the other standard-setting bodies by
providing guidelines to affectively conduct business in an appropriate manner. The focus on
honest reporting with valuations based on documentation and proper analysis is comparable
to the guidelines from the other standard-setting bodies.
The following major elements are required in the statement on standards for valuation
services (SSVS):
Professional Competence – A valuation analyst should have a solid understanding of
valuation principles and theory, as well as the ability to identify, gather, and analyse data,
consider and apply appropriate valuation approaches and methods, and use professional
judgment in developing a value estimate (AICPA, 2007).
Establishing an Understanding with the Client – The valuation analyst should establish an
understanding with the client, and whether it is written or oral, the valuation analyst should
modify the understanding if circumstances arise during the engagement that necessitate doing
so (AICPA, 2007).
Objectivity and Conflict of Interest – The principle of objectivity imposes the obligation to be
impartial, intellectually honest, disinterested, and free of conflicts of interest. Where a
potential conflict of interest exists, a valuation analyst must make the required disclosures and
obtain consent under the "Conflicts of Interest" interpretation (AICPA, 2007).
Three of the many major requirements in the statement on standards for valuation services
(SSVS) are:
1) 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" (AICPA.org, 2015).
2) d Objectivity and Conflict of Interest - "The code requires objectivity in the performance of
all professional services, including valuation engagements" (AICPA.org, 2015). This means
that a valuation analyst must be free from conflicts of interest, and must remain objective and
uninterested personally in the valuation itself.
3) d 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.org,
2015). The analyst must then modify the understanding if they encounter unforeseen
circumstances during the engagement that make it appropriate to do so.
SSVS standards seem to be in line with other standards that are set my standard-setting bodies
like the International Accounting Standards Board (IASB) and the US Financial Accounting
Standards Board (FASB) in that they set guidelines to make sure consistent, honest, and
accurate reporting is done on behalf of the valuation analyst.
AICPA. (2007, June). Statement on Standards for Valuation Services (VS Section 100).
https://www.aicpa.org/resources/download/statement-on-standards-for-valuation-services-vs-
section-100
AICPA statement on Standards for Valuation Services No. 1, valuation of a business,
business ownership interest, security, or intangible asset. (2015). Business Valuation and
Bankruptcy, 179–254. https://doi.org/10.1002/9781119198291.app1
