What would Hitchner do?

BVWireIssue #68-3
May 22, 2008

“When the standards [SSVS 1] were first announced, there was anxiety over how to assist an attorney who just wants a number that they can use to settle a case,” said Jim Hitchner, in his presentation on SSVS 1 at last week’s AICPA/AAML National Conference on Divorce.  So the AICPA came up with the calculation engagement, which “is quite broad,” Hitcher explained.  “You can do as much or as little work as you need, as long as you do the list of items,” he told appraisers in the audience.  And to the attorneys, “there is a level of service that the CPAs can provide you that will cost a lot less money.”

But there are problems.  One of the disclosure requirements is that a calculation engagement does not include all of the procedures and methods involved in a valuation engagement.  “You must state that had you prepared a valuation engagement, the result could be different,” Hitchner said.  A calculation engagement also involves the appraiser and the client agreeing on the procedures and methods to be used.  “In a testimony situation, that could be a problem,” Hitchner says.  “You also have to admit that, if you did more work, the value could be different.”

His solution?  “We will prepare a calculation engagement under the [AICPA] rules for settlement purposes.  If you request that we testify either in a deposition or at trial, then we will prepare a full valuation.  In my shop, we will not do a calculation for testimony,” Hitchner says.  “That doesn’t mean that you shouldn’t.  If you’re working in a locality where everyone accepts calculations, then you may be okay to do a calculation for a trial.  But all it takes is one attorney to rough you up,” he adds, echoing Trugman, et al.  Questions on cross examination (“What did you agree to do?”  “What procedures did you omit?”  “You say it could have been different. How different?”) might not be worth the price of the engagement.

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