It’s conference season, and BVWire has hit the road to keep you up-to-date on key matters facing the profession. There was a record attendance at the 12th Annual Fair Value Conference on the beautiful campus of the University of Southern California in Los Angeles. Co-organizers Ray Rath (Globalview Advisors) and Professor Tom Ryan (USC Leventhal School of Accounting) greeted an eager crowd at what has shaped up to be the best conference of its kind.
CEIV: A lot of the talk at the conference was around the new credential for fair value for financial reporting: Certified in Entity and Intangible Valuations™ (CEIV™). The ASA has already begun to issue the credentials (and so has the AICPA). Being in its infancy, the program is undergoing refinements and ongoing development. For example, the questions in the first half of the exam (fair value body of knowledge) are being tweaked. There’s also some concern that the body of knowledge training is too basic for experienced practitioners, so they should be exempt from that part of the training (but not the exam).
At the conference, a panel of auditors from the Big Four all agreed that the fair value efforts are “on the right track,” but they are taking a “wait-and-see” attitude on it. One concern is over the quality control process, which is still under development. All CEIV holders will have to submit a report and work file in the first year for a compliance review. The review will focus on compliance with the Mandatory Performance Framework (MPF), which is a set of best practices all CEIV holders must follow. However, it’s anticipated that anyone doing fair value for financial reporting will be expected to comply with the MPF. While some people say the MPF doesn’t require any more work, some disagree and point to the demanding requirements for documenting your due diligence on prospective financial information.
Other key matters: Many other fair value issues were discussed at the conference—here are just a few main points:
- Ratios will change overnight when FASB’s new revenue recognition and lease accounting rules start to kick in;
- The PCAOB will soon issue new standards on auditing fair value measurements (scheduled for June 30);
- Comment letters are being reviewed on The Appraisal Foundation’s exposure draft on valuing contingent consideration; final version TBA;
- Dilution from future issuances of securities can have a big impact on the values of existing securities, but guidance is limited;
- The International Valuation Standards Council will form a new board on financial instruments; and
- The AICPA is working on a new credential for financial instrument valuation.
We’ll give you more takeaways on other matters next week!
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