We reported on the changes to IVS 200 regarding the definition of business interests in the 2 March 2021 edition of BVWire—UK. Another proposed addition to the current standards (planned for January 2021) involves further definition of adequate procedures required in a business valuation.

These “Proposed Changes to IVS 102 Investigations and Compliance” provide additional clarification to the General Standards, say IVSC. Here’s the language of the new standard (comments may be submitted via IVSC.org):

40. Governance

40.1. Valuation processes should be governed in order to ensure high quality valuations. Governance should clarify the roles and responsibilities of the parties involved in the valuation process.

40.2 A systematic approach should be used in order to ensure sound valuation results. Governance over the valuation process should include considerations such as:

1. Independence and professional scepticism of those involved in the valuation process to make certain that the valuation is free from bias.
2. Pre-planning to establish a sound approach that addresses all relevant valuation factors.
3. Consistent and systematic processes to help provide completeness and accuracy.
4. Internal controls to check findings and judgements at various steps of the valuation process.
5. Transparency into the valuation approach(es) that were used and the factors that resulted in that determination.
6. Documentation (see IVS 102 Investigations and Compliance, Section 30 Valuation Record and IVS 103 Reporting) that includes a demonstrable understanding of the contractual and performance features of the unit being valued and how they are each addressed in the valuation.

40.3. Governance should clarify the roles and responsibilities of the parties involved in the valuation process.

40.4 Controls should be in place to verify the quality and observability of the inputs and tools used in the valuation process, including:

1. Sources for reliable and observable data.
2. High quality modelling systems, as applicable.