An appraisal is the same as a valuation, which is defined as “the act or process of determining the value of a business, business ownership interest, security or intangible asset” according to the International Glossary of Business Valuation Terms. Appraisal organizations have standards that apply to the performance of valuation services. These different standards provide for different levels of services to be reported in different kinds of reports.
Valuation engagements result in either conclusions of value (also referred to as opinions) or calculations of values. In general, conclusions of value can be reported in detailed or summary reports and calculations of values are reported in calculation reports.
Typically, if you are valuing the business for compliance purposes a conclusion of valuation is necessary. Examples of compliance purposes are for gifting an interest, filing an estate tax return, ESOP reporting or valuing charitable contributions. Typically a conclusion of value is also used for litigation purposes.
The valuation process to reach a conclusion of value may take between four and eight weeks. Fees may vary depending upon the circumstances. Some practitioners will quote a fixed fee for valuation engagements, while others charge hourly. Fees may not include database fees which can be charged separately.
Calculations of value may be used in situations where the parties agree to certain limitations of scope, usually for budgetary purposes. These lower level engagements are not suitable for all purposes.
(For a more detailed discussion of the types of valuations and types of reports click here.)
© 2009 Florida Business Valuation Group
