Business Valuation

Types of Business Valuation Reports

What a valuation report contains, and the difference between a calculation of value and a conclusion of value.

Report
Clarity
Scope
Alignment
Litigation
Awareness
Professional
Standards
Defensible
Analysis

The way a business valuation assignment is performed and reported can vary significantly depending on the purpose of the engagement, the intended use of the resulting value, and the requirements of the intended users, such as courts, taxing authorities, or transaction participants.

Understanding the available engagement types, reporting formats, and the professional standards that govern them helps ensure that a valuation is appropriately scoped, well supported, and suitable for its intended purpose.

Choosing the Appropriate Valuation Engagement and Report

The appropriate engagement depends on the purpose of the valuation, intended users, and level of analysis required. Applicable professional, tax, regulatory, or court requirements may also affect the scope of the engagement and form of reporting.

Insight Forensic & Valuation Services works with clients and their advisors to determine the appropriate engagement and reporting format based on the purpose, intended use, and applicable requirements of the valuation.

How the engagement and reporting format affect the fee is set out in business valuation services pricing and scope.

Valuation Engagement

In a valuation engagement, the valuation analyst determines the valuation approaches and methods appropriate to the assignment and performs the procedures necessary to develop a conclusion of value. The scope is not limited to specific valuation procedures agreed upon with the client.

The resulting conclusion reflects the analyst's professional judgment based on the analysis performed and information considered. It may be communicated through a detailed valuation report or summary valuation report, depending on the applicable reporting requirements.

Calculation Engagement

In a calculation engagement, the valuation analyst and client agree on the specific valuation approaches, methods, and procedures to be performed. Unlike a valuation engagement, the analyst does not perform all procedures that might otherwise be considered necessary to develop a conclusion of value. Calculation engagement does not constitute a valuation engagement and does not provide an opinion of value.

Because of this limited scope, the result is expressed as a calculated value rather than a conclusion of value. A calculation engagement may be appropriate when the agreed-upon procedures are sufficient for the intended use.

Detailed and Summary Valuation Reports

Detailed Report

A detailed report provides a comprehensive explanation of the valuation analysis and resulting conclusion of value. It describes the subject business and ownership interest, applicable valuation framework, financial and operating information considered, significant adjustments and assumptions, valuation approaches and methods applied, and the basis for the conclusion. A detailed report may be appropriate when the valuation requires extensive written support or is expected to receive substantial review or scrutiny.

Summary Report

A summary report also communicates a conclusion of value but presents the valuation analysis in a more condensed form. It summarizes the significant information, procedures, assumptions, and valuation methods necessary to explain the conclusion without the more extensive presentation of a detailed report. The appropriate reporting format depends on the intended use, intended users, and requirements of the assignment.

What a Valuation Report Communicates

A valuation report identifies the key elements of the assignment and explains the basis for the resulting value. It generally includes:

The description of the business, asset, or ownership interest being valued
The valuation date and purpose of the valuation
The applicable standard of value and, where relevant, premise of value
The financial, operational, industry, and other information considered
The financial analysis performed and significant adjustments, where applicable
The valuation approaches and methods considered and applied
Valuation adjustment including Discount for the Lack of Control (“DLOC”) and Discount for the Lack of Marketability (“DLOM”)
Significant assumptions relevant to the analysis
The conclusion of value or calculated value, as applicable
Applicable limitations, qualifications, and disclosures

The extent of discussion and supporting detail varies with the type of engagement and report.

The approaches a report describes, and when each is informative, are compared in our explainer on business valuation methods.

Valuation Reports in Litigation

Valuations prepared for litigation may be reviewed by counsel, opposing experts, and the court. The engagement and reporting format should therefore be appropriate for the type of valuation opinion required and the requirements applicable to the matter.

Where an expert conclusion of value is required, a calculation engagement may not provide the scope of analysis necessary for the intended use. Litigation engagements may also involve review of opposing expert analyses, deposition preparation, or trial testimony.

Review of an opposing analysis, deposition and trial testimony are described further under litigation support.

Professional and Valuation Standards

Our valuation professionals perform engagements in accordance with the professional and valuation standards applicable to the assignment and their credentials, which govern the development, documentation, and reporting of the analysis.

Depending on the valuation professional's credentials, applicable standards may include:

Statement on Standards for Valuation Services (SSVS), issued by the American Institute of Certified Public Accountants (AICPA)
Uniform Standards of Professional Appraisal Practice (USPAP), issued by the Appraisal Standards Board of The Appraisal Foundation; all American Society of Appraisers (ASA) credential holders are required to comply with USPAP
Professional Standards issued by the National Association of Certified Valuators and Analysts (NACVA), applicable to its CVA and MAFF credential holders
Internal Revenue Service guidance, including Revenue Ruling 59-60, applicable to valuations prepared for federal tax purposes

How those six sets of standards differ, and what each requires of the report, is compared in our overview of business valuation professional standards.