The recently finalized rules related to the new CEIV credential contain a few changes and some key points to emphasize. First, the rules now apply not only to fair value for financial reporting for public companies, but to private firms as well. Second, the rules are designed as best practices for anyone doing fair value work for financial reporting purposes regardless of whether you have the credential or not. And third, there is no longer an exemption from part of the education requirements for experienced professionals, according to William Johnston (Empire Valuation Consultants LLC), chair of the ASA’s BV committee and the ASA’s CEIV program development representative.
Wider reach: The rules, called the Mandatory Performance Framework (MPF), are designed to make sure that the valuation expert adequately documents his or her work and thought processes. The guidance does not explain “how to” perform a valuation but rather “how much” documentation is required. An individual who has the new Certified in Entity and Intangible Valuations™ (CEIV™) credential is required to comply. For those without the credential, the rules say the MPF documents “should be considered best practice” (emphasis is theirs) when doing fair value measurements for financial reporting purposes. The MPF documents also make it clear that the rules apply whether the engagement involves an entity required to submit registration statements or filings to the SEC or a privately held entity that prepares and issues financial statements in accordance with U.S. GAAP.
Another change deals with the education requirement for the credential, which involves a two-part course, one part on a body of knowledge and the second part on the MPF. There’s also a two-part exam covering both parts of the education. Originally, individuals with a great deal of experience in fair value could skip the body of knowledge part of the education training (but would still take the same two-part exam). That was changed so that now everyone must take the same two-part education course regardless of experience. “We want to make sure that everyone is on the same high level in terms of the education and training for this new credential,” says Johnston.
Exam almost ready: The ASA, AICPA, and RICS are very close to finalizing the CEIV exam, and Johnston expects it to be ready in March shortly after a CEIV course he’s teaching (along with Ray Rath) at the end of this month. The exam will be the same no matter which organization administers it.
Johnston talks more about the credential and the new requirements in the MPF that will affect appraisers in an interview that will appear in the April issue of Business Valuation Update.
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