Expert Valuation Reports

Valuations must be based on what was known or knowable, or was reasonably anticipated, at the valuation date. Subsequent events (i.e., conditions that were not known or knowable and/or events that arose subsequent to the valuation date) can be disclosed in the valuation report but are not foundational as to the opinion expressed. SSVS-1 paragraph 43 and IBA paragraph V.C.1.(12) state that in circumstances where events may be of such nature and significance that disclosure of such events may be warranted for informational purposes only, the events do not affect the determination of value at the valuation date. USPAP Statement 3 addresses retrospective appraisals and allows for data subsequent to the effective date to be considered as a confirmation of trends that would reasonably be considered by a buyer or seller as of that date.

Both SSVS-1 paragraph 10 and the IBA paragraph III.D provide a jurisdictional exception wherein appraisers should follow applicable published authority or stated procedures if any part of the Standards differs from published governmental, judicial or accounting authority or such authority specifies valuation development procedures or valuation reporting procedures. Nevertheless, other parts of the Standards continue in full force and effect. Several examples include, but are not limited to:

• Differences regarding the standards of value where the jurisdiction ( i.e., New Jersey Appellate Division in Brown v. Brown, A-985-00T5) ruled that “neither marketability nor minority discounts apply to the valuation of defendant's ' interest in a closely held corporation for purposes of equitable distribution.” Such application is more akin to a fair value standard used in shareholder dissent and/or oppression cases rather than the fair market value standard employed in New York courts in marital dissolution cases.
• Differences regarding the definition of a marital asset. For example, the New York courts recognize that professional degrees, advanced degrees, celebrity status and the like are subject to equitable distribution, whereas no courts outside of New York take this position.
• Differences in the treatment of institutional and personal goodwill. For instance, some states, such as New York, make no distinction, but other states, including Florida, recognize and prohibit the division of personal goodwill for equitable distribution in a matrimonial matter.

In addition to the jurisdictional exception, there is also a litigation exception in both Standards (i.e., SSVS-1 paragraph 50 and IBA paragraph V.D.), wherein the valuation is performed for a matter before a court, an arbitrator, a mediator or other facilitator, or for a matter in a governmental or administrative proceeding. Because the appraiser and his/her report are subject to the rigors of direct and cross examination in the courtroom setting, the exemption applies only to reporting provisions contained in SSVS-1 paragraphs 47-49 and IBA paragraphs V.A.-V.C., regardless of whether the matter proceeds to trial or settles. A detailed valuation report issued outside of the court environment should be issued such that its contents stand on their own. Notwithstanding the reporting exemption, developmental provisions contained in SSVS-1 paragraphs 21-46 and IBA paragraphs IV.A.-IV.1. regarding due diligence and other elements of conducting the valuation continue to apply if the appraiser expresses a conclusion of value or a calculated value.