Four business appraisers sent their comments about last week’s BVWire article titled "Appraisers send 'serious concerns' to the SEC" (available here.) The original article discussed a letter that several appraisal organizations (the authors) sent to the SEC which criticized the SEC’s Draft Report on Financial Accounting. The authors’ letter stressed “that valuation specialists and the valuation community have an important role to play in fair value accounting” even though the SEC Draft implied otherwise.
BVR’s 2009 Business Valuation Firm Economics & Best Practices Survey (available in September—preorder here) brings into focus the impact of fair value accounting in the business appraisal profession. The 2009 Survey indicates a sea change in this area, citing the increased billings related to financial statements (FASB 157, 141R, 142, etc.) and their growth from an “other category” in 2006 to almost 18% of total BV billings in 2008. With the amazing growth in the fair value area, the focus on the SEC’s acceptance of business appraisers seems even more relevant.
Some of the feedback the BVWire received included:
From a CFA, ASA appraiser:
Almost three years ago at the last joint AICPA-ASA Conference, Scott Taub of the SEC gave a speech that can be paraphrased as follows (my words):
The accountants have a single regulatory body over the profession (the AICPA), with a single set of standards, a single set of accreditation criteria, robust oversight and enforcement of professional standards, uniform technical standards, and effective peer review. If the valuation profession expects to continue to do work for financial reporting purposes in the U.S., it had better raise its performance to the level of the accountants on all these points. If not, expect to be shut out of doing financial reporting work for public companies. Regulate yourselves effectively, or we will impose it upon you from above.
Sitting in that ballroom with several hundred of my professional colleagues, a chill ran down my spine. We were warned. None of us should be surprised at what the SEC Advisory Committee has said. While our profession has countless meetings to discuss the future intent to somehow work better together some day, and valuation standards and practices converge at geologic speed, the train is leaving the station and we're not on board. If the SEC shuts us out, we have only ourselves to blame.
From a CPA, ABV appraiser:
At a recent meeting of the California CPA Litigation Steering committee I brought the SEC Draft to the attention of the committee. I also provided a copy of the ASA/Appraisal Foundation response. It is my understanding that the subject has been referred to the senior members of the California CPA society for response. Clearly the business appraisal profession needs its voice to be heard just as strongly as the real estate contingent.
From an ASA, CPA, ABV, MCBA appraiser:
“…highly trained professionals who meet rigorous valuation-specific requirements involving experience, education, training and testing; who adhere to the Uniform Standards of Professional Appraisal Practice; and, who observe strict ethics and independence mandates” and that they “encourage greater understanding of professional appraisal designations and the body of knowledge of our profession.”
I don’t know whose reports they’re reviewing every day, but they sure don’t meet these criteria. (And yes, I’m talking about “credentialed” appraisers.)
From a non-credentialed fair value appraiser
Enough whining already………Define, create, improve and distribute proper FAS 157 guidance, education and training or concede the business to an accounting equation (at worst) or the ABV community. I can attest – from my attendance - that the only current in-depth coverage of Fair Value relates mostly to statutory dissention appraisals. Hello legacy BV community: 59-60 and the myriad of associated “creative interpretations” means nothing in the FAS 157 space! Adapt your practice to this type of work or step aside.
If you’d like to add your feedback to this ongoing discussion, please email firstname.lastname@example.org.