Financial valuation and business valuation emerge.Business valuation is a relatively new discipline. Financial valuation--the process of determining the value of a financial asset or liability--belonged first to those on Wall Street who focused on trading securities; the concept of business valuation, or valuing private companies, arrived on Main Street about 25 years ago by entering the world of CPAs and those trained in finance. As the base of knowledge expanded, business valuation emerged as a consulting specialty The nature of valuation is different from general accounting. Where accounting largely involves the recording, classification and presentation of historic information, valuation is forward-looking, based primarily on estimates and, consequently, more subjective. In fact the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. described valuation as an inexact science in revenue ruling 59-60. Still, the valuation process has a disciplined approach that practitioners must learn and apply properly in order to arrive at a reasonable estimate of value. Financial valuation has expanded significantly; on Wall Street, it has become highly quantitative. Business valuation has evolved, too, making practice more complex and the need for specialized training more acute. As business valuation practices grow, some analysts are specializing by industry or technical area. Five North American associations--the AICPA AICPA See American Institute of Certified Public Accountants (AICPA). , American Society of Appraisers, Canadian Institute of Chartered Business Valuators, Institute of Business Appraisers and National Association of Certified Valuation Analysts--grant certifications in business valuation to individuals who demonstrate competency through testing and other criteria. Practitioners can obtain guidance from many sources. The AICPA is currently developing valuation standards for its members; the other organizations already publish standards. In addition the Appraisal Foundation publishes the widely recognized Uniform Standards of Professional Appraisal Practice Uniform Standards of Professional Appraisal Practice can be thought of as the quality control standards applicable for appraisal analysis and reports in the United States and its territories. that cover real estate, personal property, business and intangible assets. The Private Equity Industry Guidelines Group has developed its own valuation guidelines for funds investing in private equity With so many sets of guidelines to choose from, some are calling for a single recognized valuation standard. Practitioners also have access to guidance on valuation ("fair value measurement" in GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). literature) and related audit activities from the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). , Securities and Exchange Commission and Auditing Standards Board In the United States, the Auditing Standards Board (ASB) is the senior technical committee designated by the American Institute of Certified Public Accountants (AICPA) to issue auditing, attestation, and quality control statements, standards and guidance to certified public . Guidance also is under discussion at the Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (or PCAOB) (sometimes called "Peekaboo") is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. , the International Accounting Standards Board  An editor has expressed concern that this article or section is .Please help improve the article by adding information and sources on neglected viewpoints, or by summarizing and and the International Valuation Standards Committee The IVSC - The International Valuation Standards Committee, is a Non-governmental Organisation (NGO) member of the UN, with membership that encompasses all the major national valuation standard-setters and professional associations from 41 different countries. . In response to the demand for business valuation services and an absence of relevant education at universities, several organizations have developed programs that teach business valuation. The AICPA's six-day "Business Valuation Essentials" course covers the core knowledge used in business valuation: economics, finance, industry analysis, financial statement analysis, sales transaction research and valuation methodologies. For more information, go to the AICPA's Business Valuation and Forensic & Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Services Center, www.aicpa.org/bvfls. --Michael A. Crain, CPA/ABV, managing director, The Financial Valuation Group, Fort Lauderdale, Fla., and chair of the AICPA Business Valuation Committee [GRAPHIC OMITTED] A VB/FLS PROFILE What is the primary focus of your practice? Note: Multiple answers permitted. What is the size of your practice? 5 members or less 26% 6-10 members 12% 11-25 members 16% 26-100 members 20% Sole practitioner 19% Source: December 2005 AICPA BV/FLS Membership Section survey. Note: Table made from pie chart. |
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