Business Valuation Is A Highly Specialized Finance Skill.
Therefore, you should only consider highly qualified professionals that perform business appraisals on a full-time basis. You should also be sure the appraiser would complete the assignment according to USPAP (Uniform Standards of Professional Appraisal Practice).
When selecting a business appraiser, look for an appraiser that holds both of these credentials:
- Certified Business Appraiser (CBA) from the Institute of Business Appraisers (IBA)
- Accredited Senior Appraiser (ASA) from the American Society of Appraisers (ASA)
Business valuation experts with both the CBA and ASA certifications are usually full-time professional business appraisers.
Why These Credentials Are Important
Both certifications require specific education and testing in finance and business valuation topics, actual work experience, and peer review of work product. The CBA designation requires a more rigorous peer review of work product that gives some indication of education and ability, and the ASA requires the equivalent of 10,000 hours full-time work experience in Business Valuation giving some indication of experience.
The CBA and ASA designations meet and exceed the IRS requirements for a “Qualified Appraiser. ” The ASA also requires conformity with USPAP (Uniform Standards of Professional Appraisal Practice).
About The USPAP Standards
The Uniform Standards of Professional Appraisal Practice are promulgated by the Appraisal Foundation, which is authorized by congress as the source of appraisal standards and appraiser qualifications in the United States. USPAP covers two main areas in business valuation, development and reporting:
- USPAP Standard 9 covers the development requirements, including through and comprehensive research and analysis of the subject necessary to produce an independent, unbiased, credible result.
- USPAP Standard 10 covers reporting, communication of the valuation result, in a manner that is not misleading. Standard 10 provides for two levels of reports, a Restricted Appraisal Report, used when the client is the only reader, and an Appraisal Report, used when the reader is an outside party. The Appraisal Report is intended to provide enough information for the reader to understand the rational for the opinions and conclusions expressed in the report.
A USPAP compliant Appraisal Report presents a thorough analysis in a credible manner that will stand up to scrutiny and cross-examination. In addition, it fully meets the requirements of a “Qualified Appraisal” under IRS regulations.
The USPAP Appraisal Report provides a credible answer that sets reasonable expectations, minimizes negotiations, reduces the risk of audit, wins your case and ultimately saves the client money in the end.
Why Can’t My Accountant (CPA) Do The Valuation?
Business valuation requires specialized finance skills. Accounting and Finance are two related, but very different specialties. In most college and universities, accounting and finance are separate majors. The vast majority of accountants have not had the education and experience necessary to complete a professional business valuation.
While some accountants have received preliminary training in business valuation from either the American Institute of Certified Public Accountants (AICPA) or National Association of Certified Valuation Analysts (NACVA), they typically do simple calculations and summary reports on a part-time basis that do not meet the basic requirements of USPAP.
The client thinks this is going to save them money. However, it does not. What it does is set false expectations that result in longer more difficult negotiations (IRS audit, extended court battle, or difficult sale) – ultimately, costing the client much more money.