Comparison of Business Valuation Professional Standards

Statement on Standards for Valuation Services (AICPA)

The Statement on Standards for Valuation Services No. 1 (SSVS), now codified as AICPA VS Section 100, applies to AICPA members who perform engagements to estimate the value of a business, business ownership interest, security, or intangible asset. Certain engagements are excluded from its scope, including attest engagements, valuations prepared solely for internal management use, engagements limited to calculating economic damages, and purely mechanical computations.

SSVS distinguishes between a valuation engagement, in which the analyst applies professional judgment to develop a conclusion of value, and a calculation engagement, in which the analyst and client agree on specific approaches, methods, and procedures, resulting in a calculated value rather than a conclusion of value. SSVS requires the analyst to identify the applicable standard and premise of value, gather relevant financial and nonfinancial information, and consider the income, market, and asset-based approaches, as applicable. Depending on the type of engagement, the result may be communicated through a detailed report, a summary report, or a calculation report.

SSVS also includes a Reporting Exemption for Certain Controversy Proceedings: a valuation performed for a matter before a court, an arbitrator, a mediator or other facilitator, or a governmental or administrative proceeding is exempt from SSVS's reporting requirements, whether the matter proceeds to trial or settles. The exemption applies only to the reporting provisions; the underlying development standards continue to apply whenever the analyst expresses a conclusion of value or a calculated value.

The difference between a valuation engagement and a calculation engagement, and the reports each produces, is set out in types of business valuation reports.

Uniform Standards of Professional Appraisal Practice & ASA Business Valuation Standards

The Uniform Standards of Professional Appraisal Practice (USPAP) is issued by the Appraisal Standards Board of The Appraisal Foundation, a nonprofit organization authorized by Congress as the source of appraisal standards and appraiser qualifications. USPAP Standards 9 and 10 address the development and reporting of business appraisals, respectively, and apply broadly to appraisers bound by USPAP, whether by law, regulation, or the terms of an engagement.

The American Society of Appraisers (ASA) requires all of its members, including Candidates, Accredited Members, Accredited Senior Appraisers, and Fellows, to comply with USPAP. In addition, ASA issues its own Business Valuation Standards (BVS I through IX), which address matters such as financial statement adjustments, the asset-based, income, and market approaches, valuation discounts and premiums, and intangible assets. ASA's BVS-VIII, addressing comprehensive written business valuation reports, generally requires such reports to meet the requirements of USPAP Standard 10 unless the assignment calls for a less comprehensive report.

NACVA Professional Standards

The National Association of Certified Valuators and Analysts (NACVA) issues its own Professional Standards, applicable to its Certified Valuation Analyst (CVA) and Master Analyst in Financial Forensics (MAFF) credential holders. Like SSVS, NACVA's standards distinguish between a valuation engagement, resulting in a conclusion of value, and a calculation engagement, resulting in a calculated value.

NACVA's Development Standards require a defined fundamental analysis addressing factors such as the nature and history of the business, the economic outlook, financial condition, earning and dividend capacity, and prior sales of interests in the business, among others, factors that closely track those set out in Revenue Ruling 59-60. Depending on the engagement, the result may be communicated through a detailed report, summary report, or calculation report. Valuations prepared for a court, arbitrator, mediator, or governmental or administrative proceeding are generally exempt from NACVA's Reporting Standards, although the Development Standards and ethical requirements continue to apply.

IRS Business Valuation Guidelines

The Internal Revenue Service's Internal Revenue Manual (IRM) 4.48.4 sets out business valuation guidelines for IRS engineers, appraisers, and other personnel who develop or review business valuations for tax administration purposes. Unlike the other standards addressed here, the IRM's guidelines are not binding on outside practitioners; however, valuations submitted by taxpayers or their advisors are often reviewed by IRS personnel applying these guidelines.

The IRM does not itself define a standard of value; instead, it applies the standard established by the Internal Revenue Code and case law for the specific tax provision at issue, typically fair market value as defined in Revenue Ruling 59-60 for gift, estate, and income tax matters. The IRM directs examiners through a development process involving planning, identifying the property, interest, valuation date, purpose, and standard of value, and analyzing the nature of the business, its economic outlook, financial condition, and earning capacity. The IRM does not reference USPAP, SSVS, ASA, or NACVA standards and does not distinguish between report types.

International Valuation Standards (IVSC)

The International Valuation Standards (IVS) are issued by the International Valuation Standards Council (IVSC), an independent, not-for-profit organization that develops globally recognized valuation standards. Adoption of the IVS is voluntary, and the IVSC does not audit, monitor, or otherwise enforce compliance; however, any valuer or entity that states a valuation was performed in accordance with the IVS must comply with all applicable requirements.

The IVS consist of an IVS Framework, General Standards (IVS 100 through 106) applicable to all valuation assignments, and Asset Standards addressing specific asset types, including IVS 200, Businesses and Business Interests. The IVS directly define several bases of value, including market value, equitable value, investment value/worth, synergistic value, and liquidation value, and separately identify other bases of value defined by outside authorities, such as fair value under International Financial Reporting Standards and fair market value as defined by the OECD and the U.S. Internal Revenue Service. Reporting requirements under IVS 106 do not prescribe a particular report format; rather, they establish minimum content that any valuation report must convey.

The IVS generally treat other professional standards, such as those issued by AICPA, ASA, and NACVA, as compatible with and additive to the IVS, and following them in addition to the IVS is not treated as a departure so long as all applicable IVS requirements are also satisfied. The IVSC and The Appraisal Foundation have jointly published a guide, A Bridge from USPAP to IVS, intended to help appraisers familiar with USPAP produce valuations that are also compliant with the IVS.

Where the engagement itself crosses borders, the practical questions that raises are described under cross-border and international services.

CBV Institute Practice Standards

The Canadian Institute of Chartered Business Valuators, operating as the CBV Institute, is the Canadian professional body governing Chartered Business Valuators (CBVs). Its Valuation Practice Standards, Practice Standard No. 100 (Valuation Conclusions and Valuation Reports), No. 110 (Valuation Reports, including Appendices A and B), No. 120 (Scope of Work), and No. 130 (File Documentation), apply to CBVs and Registered Students performing an independent valuation engagement resulting in a Valuation Conclusion. Non-independent advisory work is governed separately under the CBV Institute's Advisory Report standards.

Rather than the two-tier framework used by AICPA and NACVA, the CBV Institute uses a three-tier framework: a Comprehensive, Estimate, or Calculation Valuation Conclusion, selected using professional judgment based on the scope of work performed and communicated to the client in writing, with a corresponding report level under Practice Standard No. 110. Practice Standard No. 120 sets out minimum scope-of-work requirements, including technical competence, assessing the reliability of information and tools (expressly including artificial intelligence), and documenting reasonableness testing of the results, while Practice Standard No. 130 sets minimum file documentation requirements. The CBV Institute does not itself mandate a single basis of value and permits the IVS as an acceptable alternative to its own standards where the valuator's professional judgment supports their use and IVS compliance is disclosed. Separate appendices to Practice Standard No. 110 impose additional disclosure requirements for valuations prepared for non-arm's-length transactions under Canadian securities law and for financial reporting purposes.

Similarities and Differences Across the Standards

While each set of standards reflects its own scope, structure, and terminology, several themes are common across them:

• Each set of standards requires the valuation professional to identify the applicable standard (or basis) of value and, where relevant, the premise of value, though most do not themselves define every possible standard
• AICPA and NACVA use a common two-tier framework distinguishing a valuation engagement, resulting in a conclusion of value, from a calculation engagement, resulting in a calculated value; the CBV Institute uses a related three-tier framework (Comprehensive, Estimate, and Calculation Valuation Conclusions); USPAP, the IRM, and the IVS do not use this specific terminology
• All six draw on the same three general valuation approaches, income, market, and asset-based (or cost), though the extent of specific guidance on each approach varies
• Reporting requirements range from prescribed report tiers (AICPA, ASA/USPAP, NACVA, and the CBV Institute) to a single report format (IRS) to minimum content requirements without a prescribed tier (IVS)
• AICPA and NACVA both provide a reporting exemption for valuations performed for a court, arbitrator, mediator, or governmental/administrative proceeding, in each case limited to the reporting requirements, with the underlying development standards continuing to apply; USPAP, the IRM, the IVS, and the CBV Institute's standards do not include a comparable litigation-specific reporting exemption, and generally apply the same requirements regardless of purpose, subject to jurisdictional or legal departures
• AICPA, ASA, NACVA, and the CBV Institute standards apply based on professional membership or credentials, the IRM applies only to IRS personnel, and the IVS apply on a voluntary basis to any valuer who elects to represent compliance with them
• The CBV Institute and the IVS each recognize the other: the CBV Institute permits the IVS as an acceptable alternative to its own Practice Standards where professional judgment supports their use and IVS compliance is disclosed, paralleling the IVS's own treatment of other professional standards as compatible with and additive to the IVS

The three approaches every one of them recognises are compared in our explainer on business valuation methods.

Applying Multiple Standards

A valuation professional may be subject to more than one set of standards in a single engagement, for example, a CPA who also holds an ASA, NACVA, or CBV credential, or a valuation performed for a U.S. tax matter that may also be reviewed against IRS guidelines. Most of these standards include a jurisdictional exception or departure provision allowing the valuer to follow conflicting governmental, judicial, regulatory, or other authoritative requirements while still complying with the balance of the standard.

Determining which standards apply, and how potentially overlapping requirements are addressed, depends on the valuation professional's credentials, the purpose and intended use of the valuation, and the jurisdiction and forum in which the engagement is performed.

Which standards an engagement is performed under is settled when the assignment is defined, which is where a business valuation starts.