The National Association of Certified Valuators and Analysts recently responded to the third exposure draft of proposed changes to the 2014-15 Uniform Standards of Professional Appraisal Practice (USPAP). In a letter to the Appraisal Practices Board, Parnell Black,president, and Robert Grossman, chair of the standards committee, target three main areas of concern:
- First, calculation of value engagements have “proven to be very useful” and serve a “specific need” in the user marketplace. Moreover, NACVA’s professional standards as well as the AICPA’s SSVS-1 explicitly permit calculation engagements under certain circumstances. Yet the current USPAP draft and its two new proposed definitions of “report” (a standard appraisal and restricted appraisal) do not include a calculation within its list of excepted services (Section 1).
“No valuation analyst would suggest that a calculation engagement rises to the level of an appraisal, as that term is defined under USPAP,” the letter says. At the same time, given market acceptance and institutional approval, NACVA asks the board to either add the term "calculation assignment" or "calculated value assignment" to the Iist of excepted services and to the definition of restricted appraisal or to add a third definition. (Note: In contrast, the ASA’s written comments essentially approved the current definitions as complying with its BV standards.)
- Second, appraisers who act as consulting experts for attorneys during the initial stages of litigation frequently find their roles expanding to that of testifying exert when the matter proceeds to trial. Should that happen, the experts may not be able to comply strictly with the new proposed directive (in Section 1) that limits an expert’s ability to act as an appraiser and an advocate for the client "in the same case.” As a solution, NACVA suggests the board simply revise this language to read “at the same time,” thus leaving the appraiser “free to make the very personal decision” whether to proceed as an independent expert in any one case.
- Finally, NACVA asks the board for feedback on four specific fact patterns, two concerning an appraiser’s calculation value of a private company (on an equity-unit and asking-price basis) and two regarding the delivery of a fairness opinion, one using agreed-on valuation techniques and the other using standard methodologies. “We respectfully request that the ASB address these circumstances to confirm the Board's interpretation of the applicability of the USPAP standards in such cases.” To read the complete comment letter, click here.