Business valuation: Understanding and improving the profession

The rapid growth of the business valuation profession has led to fragmentation, causing regulators to questions the consistency, quality, and transparency of valuation work products. Concerns raised in the US triggered the business valuation profession to take a first step to improve the current landscape and contribute to a more unified profession. RICS representatives have joined representatives from the American Institute of Certified Public Accountants (AICPA) and the American Society of Appraisers (ASA) to develop a shared credential for the business valuation profession. The new credential, known as the Certified in Entity and Intangible Valuations (CEIV ™ Credential), responds to regulatory concerns, and promotes enhanced audit quality, consistency and transparency in fair value measurements. There are still issues around consistency in terms of valuation approach. Business valuations often involve valuing both real estate and intangible assets. Distinguishing between real estate and intangible assets may superficially seem relatively straightforward, but there are certain anomalies that a valuer must be aware of and these are highlighted in this paper. Valuation is complex. Companies and financial stakeholders are protected and regulators can have confidence in the profession when valuers meet technical competency requirements, adhere to ethical codes of conduct, and act with due care.