When selecting a business valuation expert, it is important to consider an appraisers’ credentials and experience. A comparison of the primary business valuation designations is shown below.
Comparison of the Primary Business Valuation Designations
| American Society of Appraisers (ASA) | Institute of Business Appraisers (IBA) | American Institute of Certified Public Accountants (AICPA) | National Association of Certified Valuation Analysts (NACVA) | ||||
|---|---|---|---|---|---|---|---|
| Designation | Accredited Senior Appraiser |
Accredited Member | Certified Business Appraiser |
Master Certified Business Appraiser |
Accredited in Business Valuation |
Certified Valuation Analyst |
Accredited in Business Appraisal Review |
| Acroynm | ASA | AM | CBA | MCBA | ABV | CVA | ABAR |
| Educational or Other Credential Requirements |
4-Yr College Degree or Equivalent | 4-Yr College Degree or Equivalent | 4-Yr College Degree or Equivalent | 4-Yr College Degree or Equivalent | Only Available to CPAs |
CPA or Other 4-Year Business Degree | 4-Yr College Degree or Equivalent |
| BV Experience Requirement |
5-Years Full-Time Business Appraisal Experience | 2-Years Full-Time Business Appraisal Experience | 90-hour Classroom Requirement or Holding of Other Valuation Certifications | CBA for at 10 Years & Not Less Than 15-Years Full-Time Business Appraisal Experience | Substantial Involvement in Six (6) Business Valuation Engagements | Substantial Involvement in Ten (10) Business Valuation Engagements | Hold at Least One Other Business Valuation Designation from ASA, IBA, AICPA or NACVA |
| Coursework & Exam Requirements |
Successful Completion of Four 27-Hour Training Courses with Exams at End of Each | Successful Completion of Four 27-Hour Training Courses with Exams at End of Each | Successful Completion of 5-Hour Proctored Exam (Waived for ASA, CVA or ABV Designation Holders) | N/A since must have already been a CBA for at least 10 Years | Successful Completion of a 6-Hour Proctored Exam (Waived for ASA or AM Designation Holders) | Successful Completion of a 5-Hour Proctored Exam and Completion of Sample Case Study | Complete Five (5) Day Workshop, Pass Proctored Exam & Complete One BV Appraisal Review |
| Peer Report Review | Yes, 1 report | Yes, 1 report | Yes, 2 reports | N/A | No | No | No |
| Continuing Education Requirements |
100 Hours Every Five (5) Years | 100 Hours Every Five (5) Years | 36 Hours Every Three (3) Years | 36 Hours Every Three (3) Years | 60 Hours Every Three (3) Years | 36 Hours Every Three (3) Years | 36 Hours Every Three (3) Years |
| Ethics Exam | Yes | Yes | No | No | No | No | No |
| Uniform Standards of Professional Appraisal Practice (USPAP) Exam |
Yes | Yes | No | No | No | No | No |
Choosing a Business Valuation Expert
As you can see from the chart above, the ASA designation is often viewed as the premier designation for business valuation because of the significant experience, education and report review requirements.
The credentials and experience of an appraiser are two of the most important areas of consideration when hiring a business appraiser. This is particularly true when the appraisal may be challenged (i.e. tax valuations, ESOP valuations, or divorce valuations). A number of court cases over the years have commented on the inadequacy of a business appraiser’s training, certification and competence to testify as a business valuation expert. A few of these cases are listed below:
Court Cases Where the Court Considered the Business Valuation Expert Unqualified
Estate of Joyce Hall, 92 T.C. 312, 336 (1989) Estate of Margaret Jann, T.C.M. 1990-333 CCH Dec. 46,692 (1990) Estate of Berg v. Commissioner, T.C.M. 1991-279, June 20, 1991 Laureys v. Commissioner, 92 T.C.M. 101, 126-129 Estate of Samuel J. LeFrak and Ethel LeFrak v. Commissioner, T.C.M. 1993-526, filed 11-16-93 Frymire-Brinati v. KPMG Peat Marwick, 3 F.3d 183 (7th Cir. 1993) Estate of Ray A. Ford, v. Commissioner, T.C.M. 1993-580, filed 12-8-93 Mad Auto Wrecking, Inc. v. Commissioner, No. 1950-94, T.C.M. 1995-153, filed 4-5-95 Pabst Brewing Company v. Commissioner, No. 18466-92 (USTCM) 1996-506 Furman v. Commissioner, Nos. 11568-96 – 11569-96, 1998 WL 209265 (U.S. Tax Court, 4-30-98) Andrew J. Whelan, et al. v. Tyler Abell, et al., USDC, Dist. of Columbia, Civil Action Nos. 87-442 & 87-1763 (SS) Dockery v. Commissioner, No. 14915-96, 1998 WL 120369 (U.S. Tax Court, March 19, 1998) In Re MED DIVERSIFIED, INC., 2005 Bankr. LEXIS 2236 (Bankr. E.D.N.Y. November 14, 2005).
In general, the Court considers (i) the credentials of the appraiser, (ii) the experience of the appraiser (whether or not the appraiser performs business valuation on a full-time basis) (iii) whether or not the appraiser is independent in appearance and fact (not an advocate) and (iv) the training, education of the individual and their membership in various professional valuation organizations.
The advice I always give to prospective clients (or their attorneys or CPA’s) is when selecting an appraiser be sure to use an individual with at least the ASA credential. It is the best way to make sure that the individual performing the valuation has received adequate training, has sufficient experience (a minimum of five years full-time) and that you will receive a high quality report (have passed an appraisal peer review requirement).
“I have retained John several times to provide business valuations for estate and business planning clients. John is knowledgeable and detail-oriented. He keeps me updated throughout the valuation process and always provides a great work product.”
“John is a man of honor, respect and integrity. He goes above and beyond for his clients with honesty and accuracy. I look to John with high regards and much respect.”
“It is a joy to work with John because he does what he says he will do, communicates status with the client & advisory team, follows up as necessary with additional questions, produces a complete, professional product and delivers on time. He knows his business and, for the icing on the cake, he is a great person!”
“John worked extremely well with a client that needed a business appraisal for estate purposes, but was extremely distraught and as such no so motivated. John, with highest quality, compassion and professionalism got the appraisal done. Thank you again, John!”
“John Mack has done excellent business and estate planning appraisal work for me and my clients. He has a CPA and appraiser background, he stays up with current law in this area to comply with IRS requirements, and understands the issues for advanced estate planning.”