BV responses to SEC call for unification reflect . . . disunity?

BVWireIssue #112-1
January 4, 2012

Predictably, members of the BV community have started to respond to the SEC’s deputy chief accountant Paul Beswick’s recent published remarks critiquing the valuation profession for lack of a “unified voice” and unified standards. Beswick’s position “sounds eerily reminiscent of what I wrote in the ASA BV E-Letter in Oct. 2008,” writes Bill Quackenbush (Advent Valuation):

The fragmentation of our profession has created internal politics that no one else really cares about and obfuscates our ability as a profession to speak with any credibility. The SEC and Congress have already looked at the business appraisal community askance, mostly because they desire our input and we cannot speak with one voice. We should do some serious soul-searching as a profession and figure out how to effectively participate and lead in this forum rather than, at best, be regulated and, at worst, be marginalized out of relevance.

Similarly, Mark Krickovich (MK Appraisal Group) writes that the “BV community has created some of its own problem,” for instance, by tolerating the issuance of “free” credentials or those that don’t require substantial testing and oversight. At the same time, “don't forget how the SEC [and the] FASB . . . chose to ignore an entire body of BV knowledge and court-case precedent in favor of a creating their own standard, which, in the end, is very similar to FMV,” Krickovich writes. In its tighter review of third party valuation reports, ostensibly for lack of detailed assumptions and support, “I also know that the [regulators] and audit community are attempting . . . to create a ‘Narrow Band of Assumptions’ that all appraisers completing FV must follow.” This trend toward standardization “may turn out to be the best course for the public investor community, but it does require a different mindset, I think.”

As past chair of the Executive Advisory Board of NACVA, the Texas Society of CPAs’ Business Valuation, Forensics and Litigation Services Committee, and the AICPA’s Accredited in Business Valuation Review Course Task Force, “I can attest that there was a comprehensive, well-organized ‘fair disciplinary mechanism’ in place at [all organizations],” writes Paul French (Lain Faulkner & Co.), who sums up the current state of the profession as follows:

  • Years ago there was very little substantive differences between the various standards, and the differences are growing smaller year by year.
  • There are multiple “fair disciplinary mechanisms” to encourage proper behavior and enforce the rules of the profession in the public interest.
  • Moving the bell curve [on the quality of BV professionals and practices] “takes time and will be a process of continuing improvement,” French says, “as the profession continues to add and vet new tools and techniques.”  

Linda Trugman, current chair of the ASA BV Committee, writes in her most recent monthly update to members that the ASA will “continue to monitor the situation.”

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