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21 May

What should a report contain?

Posted in General valuation topics on 21.05.09

Different appraisal organizations’ standards refer to reports that express conclusions (opinions) of value by different terms.

The American Institute of CPAs (AICPA) and the National Association of Certified Valuation Analysts  both provide for Detailed or Summary Reports.  The American Society of Appraisers provides for Comprehensive Reports.  The Institute of Business Appraisers Standards allow for Formal  Reports.   Uniform Standards of Professional Appraisal Practice (USPAP) provides for an Appraisal Report.  While the standards for each organization is slightly different for the different types of reports, they basically require the same minimum information in reports.

The AICPA standards  provide for the following minimum disclosures in a Detailed Report:

  • Identity of the client
  • Purpose and intended use of the valuation
  • Intended users of the valuation
  • Identity of the subject entity
  • Description of the subject interest
  • The business interest’s ownership control characteristics, if any and its degree of marketability
  • The valuation date (effective date)
  • The date of the report
  • The type of report
  • The premise of value used in the report
  • The standard of value used in the report
  • The sources of information that are the basis for the conclusion of value reached in the report
  • Assumptions and limiting conditions applicable to the report
  • The scope of work or data available for analysis including any restrictions or limitations
  • Any hypothetical conditions used in the report and the basis for their use
  • If the work of a specialist was used in the valuation, a description of how the specialist’s work was used, and the level of responsibility, if any, the business appraiser is assuming for the specialist’s work
  • The valuation approaches and methods used (other standards require disclosure of valuation approaches and methods rejected)
  • Disclosure of subsequent events in certain circumstances
  • Any application of jurisdictional exception
  • Representation (also referred to as Certification) of the business appraiser
  • Signature of the business appraiser or the appraiser’s firm (some standards require the business appraiser to sign the representation)
  • A section summarizing the reconciliation of the estimates of value and the conclusion of value
  • A statement that business appraiser has not obligation to update the report for information that comes to his or her attention after the date of the report.

The USPAP includes most of the items is the AICPA standards and also require that business appraisals must:

  • clearly and accurately set forth the appraisal in a manner that will not be misleading;
  • contain sufficient information to enable the intended user(s) to understand the report; and
  • clearly and accurately disclose all the assumptions, extraordinary assumptions, hypothetical conditions and limiting conditions used in the assignment.

While the different appraisal organizations have slightly different requirement as to what must be included in a report, the above list is a general list of what should be in a report.

Whatever the case, the appraiser is required to follow the standard for the organization to which he or she belongs.   Standards can be viewed online at the organizations’ websites. Links to those standards are also available in my previous post.

© 2009 Florida Business Valuation Group


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