Use SEC comment letters to improve your fair value work

BVWireIssue #170-2
November 9, 2016

You can learn from the mistakes of others by reviewing the large amount of back-and-forth communications between the SEC and companies over fair value measurement issues, says Lisa Swanson (Blue Abaco Consulting). If the SEC is asking why a certain valuation method was used or why certain assumptions were made, you can bet that your clients, their auditors, or other valuation reviewers will ask you the same questions, she pointed out during a recent BVR webinar.

Fly on the wall: The SEC must review financial statements and disclosures of public firms at least once every three years. When it does, it may send a comment letter to the company if it has questions or sees problems. Companies have 10 days to respond, and all of these responses and comment letters are made public via the SEC website ( You can do a keyword search on specific issues, such as business combinations, impairment, intangibles, stock-based compensation, and the like. Examining the issues in the comment letters can help you make sure you have addressed these areas properly in your valuation report, advises Swanson.

It’s also a good way to do your due diligence when deciding to accept a new client for a fair value engagement. “One of the first things I do is check the prospective client’s SEC comment letters and responses,” she says. Is the company’s response clear and well thought-out? Or is it argumentative? What you find may make the difference in whether you take the engagement or turn it down.

Swanson reviewed a number of specific SEC comments on certain fair value issues during her webinar, Fair Value Valuation: Takeaways from SEC Comment Letters. You can access a recording of the webinar if you click here.

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