Readers comment on calculation report controversy

BVWireIssue #192-3
September 26, 2018

valuation method
calculation of value, calculation report, valuation report

Are calculation engagements a good thing or bad thing for the valuation profession? In last week’s issue, we presented two articles: one urging valuation experts to avoid calculation engagements like the plague and a rebuttal article that disagrees with this view. You can read the two articles if you click here.

Two camps: The comments we’ve received so far fall on both sides of the table: Some say they don’t belong in the valuation expert’s toolbox, and others say they have a rightful place.

“With all due respect to the authors of the rebuttal article, a calculation of value can never be used in a USPAP engagement because all USPAP engagements involve an appraisal, which is defined in USPAP as an ‘opinion of value.’ USPAP scope of work is irrelevant,” one commenter says. “The resulting work product from a calculation of value is the issue; it is simply a calculated result and not an opinion of value. Therefore, a calculation of value has no place in situations where an opinion is needed, such as situations where a USPAP engagement is required and trial work in litigation.”

“Calculation engagements could be used in much the same analogy as compilation engagements are to audit engagements,” says another commenter. “Not everyone has the funds to [spend] up to $25,000 for a small-business valuation. Instead, analysts are called on to provide an experienced third-party assessment of the calculation value of a company.”

One commenter had a few choice words about the recent AICPA guidance on this matter. “It is unfortunate that the authors of the AICPA [guidance on] calculation reports use the term ‘value.’ The Appraisal Foundation and ASA should have objected to the use of that term, which is proprietary to the appraisal industry,” he says, suggesting that the term “calculated amount” should be used instead. “The term ‘calculated value’ is misleading to the users of these reports and it misrepresents the role of the author.”

We’d love more comments on this! Also, there will be dueling rebuttals on this topic from the authors of both articles. Plus others will be chiming in, so please stay tuned!

Please let us know if you have any comments about this article or enhancements you would like to see.