The business valuation (BV) discipline has grown up over the last few decades. Valuators — and the judges and attorneys who rely on them — have become increasingly sophisticated in complex financial matters. Despite growth in the BV knowledge base, many gray areas persist, necessitating the use of credentialed valuation experts. Here’s a road map to help you navigate common valuation credentials and determine how dedicated a practitioner is to the field of BV science.
Several organizations offer BV credentials, including the American Institute of Certified Public Accountants (AICPA), the American Society of Appraisers (ASA) and the National Association of Certified Valuators and Analysts (NACVA), which merged with the Institute of Business Appraisers (IBA) a few years ago. The most common business valuation credentials you’ll likely encounter are:
Accredited in Business Valuation (ABV). This requires a CPA license and AICPA membership. Candidates also must have taken 75 hours of BV coursework within the previous five years, pass an exam and complete six valuations (or 150 hours of valuation experience within the previous five years).
Accredited Senior Appraiser (ASA). These professionals undergo a series of six courses and exams, approval of a demonstration appraisal report, and five years (or 10,000 hours) of full-time business valuation experience for accreditation. After two years of valuing businesses, a candidate may use the Accredited Member (AM) designation, if all the other requirements have been met. The ASA also offers programs for members who want to specialize in valuing intangible assets and health care providers.
Certified Valuation Analyst (CVA). NACVA merged two credentials into one designation (CVA) in April 2013. Formerly, the only difference was that CVAs were also CPAs, whereas Accredited Valuation Analysts (AVAs) required an MBA or other business degree. NACVA requires CVAs to take a five-day class, pass an exam, submit a case study or demonstration appraisal report for peer review, and complete two years of related experience (or perform 10 valuations).
Accredited in Business Appraisal Review (ABAR). NACVA also offers a credential that certifies competence in reviewing valuation reports and analyses performed by others. ABAR candidates must hold another professional designation by a recognized appraisal association, complete a five-day course, pass an exam, prepare a sample business appraisal review report and submit four professional references.
Certified Business Appraiser (CBA). Since the NACVA/IBA merger, CBAs must take the same courses as those who earn the CVA designation. CBAs also must submit two demonstration reports and pass a five-hour exam.
Last year, during a meeting of the Standing Advisory Group of the Public Company Accounting Oversight Board (PCAOB), public companies, audit firms, valuators and investors expressed the need for a uniform set of credentials for valuation specialists. Many believe that common education programs, exams, disciplinary actions, and professional ethics standards would improve the consistency of fair value estimates used for financial reporting purposes. However, the PCAOB hasn’t yet issued any proposals, and the discussions are still in the preliminary stages.
Meanwhile, the AICPA plans to launch a fair value credential related to valuing businesses and intangible assets in the spring of 2016, as well as rolling out a new credential for valuing financial instruments in the fall of 2016. The AICPA hasn’t yet revealed whether these credentials will be in the form of a new acronym or a special symbol that’s added to a professional’s existing BV credentials. The group is currently working on performance frameworks, fair value technical guidance, exams, experience and education requirements, and quality review guidance for these fair value credentials.
Each organization also has its code of ethics and professional standards, such as the Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice and the AICPA’s Statements on Standards for Valuation Services. Although these standards tend to be fairly similar, it’s important to review a valuator’s report to ensure he or she is in compliance with all requisite standards.
In addition, each organization requires its members to take continuing professional education courses. Check whether a valuator is current on his or her educational requirements. Failure to stay atop continuing education could indicate that a valuator isn’t familiar with the latest trends and research.