Supporting high-quality valuations across the financial ecosystem

June 29, 2018

Business valuation is a rapidly growing aspect of advisory services. Generational wealth transfers, the global economy, tax reform’s effect on family law and the transition in corporate balance sheet value from tangible to intangible assets have all added complexity to valuation, leading to higher demand for qualified valuation professionals.

 

Support for strengthening valuation quality

The importance of high-quality valuations across the financial ecosystem continues to be a focus for the accounting profession and its regulators. This includes management and internal valuation preparers, valuation specialists and auditors. To address this focus, the AICPA’s governing Council approved a proposal to extend eligibility for the Accredited in Business Valuation® (ABV®) credential to other qualified professionals. The proposal has the support of the AICPA’s National Accreditation Commission and several other volunteer committees, including the ABV Credential Committee, the Business Valuations Committee, the Forensic and Valuation Services Executive Committee and Board of Directors.

 

“Valuation work constitutes a real and growing trend among firms,” said Bethany Hearn, CPA/ABV/CFF of CLA and ABV Credential Committee Chair. “Several AICPA committees supported expanded ABV eligibility with the belief that the application of consistent, rigorous standards in valuation across all professionals who perform these services will enhance the valuation profession. By expanding eligibility of the ABV credential to other qualified professionals, we’re able to address the public’s need for reduced complexity and adherence to universally recognized standards.”

 

Evolving the ABV credential by expanding eligibility to include finance professionals will help maintain the rigorous professional and valuation standards established by the AICPA and will help elevate the entire valuation profession both domestically and globally. Increasing the quality of valuations through enhanced consistency, clarity and transparency will serve to protect the public interest and users of business valuation services.

 

Obtaining the ABV

While the CPA provides a solid foundation for the ABV credential, the AICPA also recognizes that many highly-qualified accountants and finance professionals pursue alternative career paths and elect not to obtain the CPA license. Qualified professionals seeking the ABV must meet rigorous professional and educational standards, and

  • have extensive requisite valuation experience;
  • pass the ABV exam or another qualifying valuation exam such as the CFA or ASA exam;
  • adhere to the AICPA Code of Professional Conduct and the Statement on Standards for Valuation Services (VS section 100); and
  • fulfill annual continuing education requirements.

 

CPAs will maintain their preferred pathway. They will be able to differentiate themselves by holding the CPA license, which is recognized for integrity and objectivity, in addition to demonstrating their expertise in valuation principles and analyses by also holding the ABV credential.

 

The state of the valuation market

CPA-led accounting firms and valuation firms recognize the complementary skills both CPAs and finance professionals offer the valuation profession. They see firsthand how the market is transforming and are evolving their practices accordingly to build and retain top talent.

 

  • Since 2012[1], there has been a steady increase in firms reporting they are planning to grow their business valuation practices.
  • Intangible assets have become a critical component of balance sheets for companies with operations located both domestically and abroad. In 2015, intangible assets made up 87% of the market value of the S&P 500 (up from 17% in 1975).[2]
  • Two of the top five areas of focus for the Public Company Accounting Oversight Board (PCAOB) continue to be valuation-related as approximately one-third of all deficiencies identified in 2015 were related to fair value measurements.[3]
  • Industry Report on Business Valuation Firms estimates over 135,000 businesses with annual revenues in the amount of $3.9 billion from business valuation services.[4]

 

With both CPAs and finance professionals playing key valuation roles in their practices, firms are seeking a single organization to provide training, credentialing, and ongoing support to their staff. In addition, they want all their valuation experts to maintain the standard of excellence established by the CPA profession.

 

Learn more during the July 16 webcast

For more information, the AICPA has published frequently asked questions, and will host a webcast on July 16 at 11:00 am ET, which will cover the future of the valuation profession. Details of the webcast will be shared soon.

 

[1] Accounting Today. Top 100 Firms. 2012-2017.

[2] Ocean Tomo. 2015 Annual Study of Intangible Asset Market Value.

[3] Acuitas, Inc.’s 2017 Survey of Fair Value Audit Deficiencies.

[4] Chrystalleni, S. (2018) IBISWorld Industry Report OD4797. Business Valuation Firms in the US.

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