IBA responds to critics of database, DMDM

BVWireIssue #66-1
March 5, 2008

“Flaws in the IBA Transaction Database and the Direct Market Data Method have…come to the attention of some vociferously articulate members of the appraisal profession,” writes director Ray Miles in the latest newsletter from the Institute of Business Appraisers (IBA).  “Some of these critics are, shall we say, not enthusiastic supporters of the concepts behind the IBA Transaction Database and the Direct Market Data Method (DMDM).  Like many of us, they are resistant to change, no matter how necessary.”

In this Part XLVII of his series on the IBA database and the DMDM, “Responding to Criticisms,” Miles says that critics often target the lack of mathematical rigor in DMDM methods and the presence of duplicates in the database.  “No method of valuing a business is perfect,” he writes.  “Many of these criticisms, while technically valid, are irrelevant in the real world in which businesses are appraised.  They reflect a vain search for precision that is inconsistent with achievable accuracy.”

But the critics help create “an active forum for discussion and debate,” Miles adds, before addressing their points.  “This is how the system is supposed to work, and the discussions are both healthy and useful.”  To access the article and the complete IBA newsletter, click here.

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