NEW BUSINESS VALUTION STANDARD

Statement on Standards for Valuation Services (SSVS) No. 1

SSVS 1 applies valuation work performed by CPAs effective January 1, 2008.

Valuations of businesses, ownership interests in businesses and intangible assets owned by businesses are needed for a variety of reasons.  Tax reasons, community property disputes such as divorce, buy-sell arrangements, management planning, financial accounting and reporting and transactions are all reasons businesses and individuals may require the services of a qualified business valuation professional.

What is important about the new standard is that when performed by a Certified Public Accountant, business valuations will need to be performed in accordance with the development and reporting standards annunciated by this new standard.

In general, there are two different levels of service a CPA may provide. 

The first, most basic level of service is a “Calculation of Value.”  In a Calculation engagement, the CPA and client agree on the method to be used to calculate the value.  After the value is calculated, the CPA exercises professional judgment as to whether the value derived is appropriate given the circumstances of the client. 

The second, more involved type of engagement is called a “Conclusion of Value.”  This engagement estimates the value of the subject by application of valuation procedures appropriate for the type of engagement determined by reference to the standard and circumstances (as opposed to the client-CPA arrangement). 

This office believes the calculation of value engagement will be mostly used for planning purposes and the conclusion of value will be used mostly in tax and litigation settings.

As is the case in all engagements CPAs undertake, Rule 201A of the AICPA Code of Professional Conduct applies.  The CPA must have the professional competence to perform the engagement.

Michael Bergeron, CPA/CVA has performed numerous valuation engagements for tax, litigation, planning and management consulting engagements.  M. BERGERON + CO. has incorporated the SSVS No.1 in its valuation practice.  If you or you organization require more information about how this important new standard affects your business or your law practice, please contact Michael Bergeron.