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New Business Valuation Standards for Accountants
In June 2007, the American Institute of Certified Public Accountants (AICPA) approved new business valuation standards effective for assignments accepted after Jan. 1, 2008 for all member accountants. The AICPA's Statement on Standards for Valuation Services No. 1 (SSVS 1), 'Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset,' is a solid, well-reasoned set of principles on how to perform and report a valuation analysis. SSVS 1 complements other business valuation standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP) and standards already in force by the American Society of Appraisers (ASA), Institute of Business Appraisers (IBA), and the National Association of Certified Valuation Analysts. (NACVA). These latter appraisal-oriented organizations have member numbers ranging from about 5,000 to 50,000, and include many accountants who regularly undertake valuation assignments for marital dissolution purposes.
The AICPA, however, with about 330,000 CPAs, is by far the largest organization with membership in every state. Previously, only AICPA members who were also members of one of the other organizations were required to adhere to the valuation standards of that other organization. The new AICPA standard will require all of its individual and firm members who are involved in business valuations to follow the newly issued standards. State Boards of Accountancy are likely to adopt the standards too, further obligating CPAs who may not be members of the AICPA.
Matrimonial attorneys need to understand the impact of these new AICPA requirements to ensure that their clients benefit from the higher quality of work now expected, and to demand adherence to these standards when exposing poor work done by the casual valuation analyst. Be prepared for increased fee demands by accountants because of the increased risk of malpractice. Alternatively, some accountants may decline valuation assignments they may have attempted in the past because of lack of education, qualifications, or an inability to do the quantity of analytical work mandated to opine 'a conclusion of value.' Oral reports may become more common, although work- paper files provided through discovery should still contain a rich source for evidentiary questions.
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