Some of the major elements required for providing a valuation for a company include: Valuation vs.
Calculation reports, General Standards Rule, and the Integrity and Objectivity Rule. Valuation
reports refer to a valuation conclusion rather than a specific number of what the company is worth.
A calculation report is a result based on the calculations provided that give a hard number of what
the company may be worth. The main difference is based on whether the parties agree on the
valuation of specific items of the organization. The general standards rule includes the guideline
that financial service companies should only take on valuation if they can reasonably complete the
tasks with professional competence. This is to circumvent companies from taking on a valuation
process as extra revenue without fully understanding whether they can complete the process with
professional competence. The integrity and objectivity rule refers to the requirement to disclose
whether the valuation analyst may have a conflict of interest with other parties throughout the
process. This can be particularly detrimental if someone close to the company or a buying party
does the valuation rather than a third party as they may take their associations into account when
traveling through the valuation process.
In terms of differentiation from other standard-setting bodies, the SSVS provides an extremely
comprehensive overview of the valuation process requirements and includes references that
expand on their individual paragraphs. Other standard-setting bodies typically have lots of material
that is scattered about on their website while the SSVS condenses this material into an easy-to-
understand document regarding this specific topic. The elements of the SSVS are typically worded
as more of a guideline based on qualitative inclusion of different factors. Other standard-setting
bodies typically include quantitative-type rules required in financial reporting.
Three of the major elements required in the statement on standards for evaluation services (SSVS)
are professional competence, Objectivity and Conflict of Interest, and The Engagement Letter.
Professional competence is required while performing a valuation analysis and the CPA must have
the ability to complete the engagement with a reasonable level of knowledge.
Objectivity and Conflict of Interest means the state of mind and for the CPA’s obligation to be
impartial, intellectually honest, and free of conflict of interest. A CPA analyst must be independent
of relationships that may impair his objectivity in rendering valuation services.
The Engagement Letter means that a CPA needs to use an engagement letter to establish an
understanding of the services to be performed and to define the responsibilities of each party.
https://archives.cpajournal.com/2008/608/essentials/p54.htm
