The Skinny on Valuation Report Options

The most common types of business valuation reports are: Detailed, Summary and Calculation of Value reports.*

Detailed and Summary valuation reports can only result from a full valuation analysis, not a limited scope analysis. A Summary report covers the same topics as a Detailed report but does not contain the same level of detail.

For almost all business valuation engagements for tax, litigation or compliance purposes, valuation experts conduct a full business valuation (aka appraisal) analysis and issue a Detailed or Summary report that sufficiently documents the facts, data and information relied upon and the assumptions and analyses made, so that the conclusions reached can be clearly understood by intended users and withstand adverse scrutiny by the IRS, DOL, SEC, trier of fact, opposing expert or other third party.

In some cases, mostly involving exit planning or actual transactions between parties who are involved in the subject business and industry and are not at odds, a limited scope Calculation of Value analysis and report may suffice. Even then, since these parties are not familiar with business valuation approaches, methods, procedures, assumptions, levels of value, rates of return, data choices, etc., a more comprehensive report can be very helpful to understanding the results of the analysis. Calculations of Value (CoV’s) are less expensive than full valuations because they are less time consuming, and a CoV reports vary greatly in length and content. An Exit Strategies valuation expert will explore this option with you when it appears to be appropriate for your needs and circumstances.

As professional appraisers, we are responsible for making sure that the scope of work we perform is appropriate. According to the NACVA standards, “The form of any particular report should be appropriate for the engagement, its purpose, its findings, and the needs of the decision-makers who receive and rely upon it.” USPAP requires that an appraiser not allow the scope of work to be limited “to such a degree that the assignment results are not credible in the context of the intended use”.

Determining the appropriate scope of analysis and report for your needs and circumstances starts with a brief phone conversation with one of our valuation experts. CLICK HERE for a list of topics for this initial conversation.

Al Statz is President and founder of Exit Strategies Group, Inc. He is an certified business appraiser (ASA and CBA) and a Merger & Acquisition Master Intermediary (M&AMI). He can be reached at 707-781-8580 or alstatz@exitstrategiesgroup.com.

 

* These terms are from the NACVA/IBA business valuation standards, last revised on August 1, 2015. Please note that ASA, AICPA (which publishes SSVS) and The Appraisal Foundation (publisher of USPAP) each use somewhat different terminology in their standards. The NACVA/IBA terms that I’m using here are generally understood by experienced valuation professionals following these different standards. Exit Strategies does not represent the AICPA, ASA, IBA, NACVA, or Appraisal Foundation and the views expressed here are solely our own and are not the official position of these organizations.