BVWire Issue #178-1 | July 12, 2017


AICPA unveils new CVFI credential for financial instruments

The push for improved quality in fair value for financial reporting continues with the introduction of a new credential by the AICPA. The Certified in Valuation of Financial Instruments (CVFI) will launch later this year. An exposure draft of a “disclosure framework” has been issued that establishes parameters of documentation requirements. Comments are due Sept. 26, 2017.

Solo effort: The CVFI can be considered a companion of sorts to the CEIV (Certified in Entity and Intangible Valuations), which was developed jointly by the AICPA, ASA, and RICS. But, unlike the CEIV, this new credential is not being developed in collaboration with other valuation professional organizations (VPOs). BVWire asked the AICPA about this, and it responded with the following statement: “We recognized a critical market need and wanted to move forward with developing a credential to address that need. Our goal is for the CVFI to become a global credential that other valuation organizations are able to offer their members.”

As the statement indicates, this new credential is not just for CPAs and will involve training, an exam, and ongoing quality control. The statement also alludes to the global nature of the credential, meaning that it will embody not just U.S. GAAP, but international standards as well, such as IFRS.

More details: In its announcement, the AICPA did not go into certain details, but BVWire gleaned some from a session we attended at the recent ASA’s 12th Annual Fair Value Conference in Los Angeles, conducted by Jeffrey High of the AICPA. He confirmed the international focus of the new credential, saying the organization was working with regulators in other countries. He also mentioned that about 30 hours of training in financial instruments would be required. Someone in the audience asked how the CVFI was different from a CFA designation. High remarked that CFAs are not necessarily versed in financial reporting and disclosure, which, of course, would be stressed in the CVFI program. He also said that the quality control process would be similar to the existing peer review process for CPAs.

For more information, the AICPA has set up a special page that includes links to the exposure draft and a sign-up form so that you can get future alerts as the credential develops.

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New Tennessee law on DLOM use in divorce valuation

The use of the marketability discount in divorce valuations has been a source of confusion in Tennessee owing to some court rulings. A recent amendment to the Tennessee Code promises to provide clarity to valuators practicing in this jurisdiction.

House bill 348, effective July 1, 2017, provides that, for purposes of achieving an equitable division of marital assets, the court, tasked with determining the interest in a closely held business, may consider “valuation methods typically used with regard to such assets without regard to whether the sale of the asset is reasonably foreseeable.” This includes the use of the lack of marketability discount, discount for lack of control, and a control premium, “if any should be relevant and supported by the evidence.”

The new provision seems to take aim at the 2007 case, Bertuca v. Bertuca, in which the Tennessee Court of Appeals rejected the use of DLOM because the owner-spouse did not indicate an intention to sell his interest in the business. “Thus the value of the business is not affected by the lack of marketability and discounting the value for non-marketability in such a situation would be improper,” the court said.

In the 2016 case, Grant v. Grant, the same court revisited the DLOM issue but, if anything, muddied the waters. The focus was on valuing the husband’s minority interest in three real estate development partnerships. The husband’s expert applied both a minority discount and a marketability discount even though the husband did not plan to sell his stakes in the partnerships. According to the expert, the DLOM served as “the gauge of a readily available market to turn a particular interest into cash.” The wife’s expert agreed with the use of a minority discount but not the use of a DLOM. The trial court found DLOM was appropriate in valuing one interest, where the husband might be compelled to sell some portion of the asset to comply with the court’s property division order. But the court rejected the use of DLOM for partnerships where the husband did not intend to sell.

The Court of Appeals said: “Generally, applicability of the use of a lack of marketability discount depends on the characteristics of the ownership interest being valued, not whether the owner of the interest actually intends to sell the interest.” This language suggested the appeals court disagreed with the trial court’s reasoning. But the appeals court added that, “in many instances, the decision to apply the discount is seen as discretionary” and depended on the facts of the case. Questions of fact are the province of the trial court, the appeals court said. Finding no abuse of discretion, the appeals court upheld the lower court’s valuation findings, leaving it unclear when to apply DLOM. The new law should answer this question.

Digests of Bertuca v. Bertuca, 2007 Tenn. App. LEXIS 690, and Grant v. Grant, 2016 Tenn. App. Lexis 327, as well as the courts’ opinions, are available at BVLaw.

Extra: The text of the new law is available here, courtesy of Robert Vance (Forensic & Valuation Services PLC).

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PCAOB issues proposals on auditing estimates and use of specialists

The Public Company Accounting Oversight Board (PCAOB) has issued for public comment two standard-setting proposals: one on auditing accounting estimates including fair value measurements and the other on the auditor’s use of the work of specialists. Of course, specialists include valuation experts. Comments on both proposals are due Aug. 30, 2017.

One of the matters the new rules seek to reinforce is that of “professional skepticism.” That is, you should not simply corroborate the information you get from management or other third parties. You need to look at any negative evidence and address it. Earlier this year, the PCAOB found that professional skepticism was lacking when a former PwC auditor failed to adequately scrutinize accounts receivable, which may have led to an overvaluation of this asset. The auditor was censured, fined, and barred for two years.

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Dealing with the bonding issue when valuing an electrical contractor

When doing a valuation, you must consider the potential impact of industry-specific issues. For electrical contractors, these issues include workforce needs, work backlogs and underlying contracts, union pension liabilities, long-term leasing agreements, and key person risk. Another key issue with electrical contractors is bonding requirements.

Common bond: The bonding process is very important, especially in large metropolitan areas where a contractor can’t work on certain jobs without being bonded, explains Matthew Crane (Marshall & Stevens). Where it’s not legally required, it’s less of an issue but still must be considered. “If a company can’t get bonded for whatever reason and this, say, prevented it in the past from expanding into a different market, then that is a negative that heightens the risk of the company,” says Erin Hollis (Marshall & Stevens). “On the other hand, if a company could get bonding but has not so far, that might represent an opportunity that could be included in the forecast or increase its potential value in the eyes of a third-party buyer.”

Crane and Hollis are contributors to BVR’s new guide, What It’s Worth: Valuing Electrical Contracting Companies, which includes more insights, a detailed case study, benchmarking data with analysis from Pratt’s Stats, rules of thumb from the Business Reference Guide, and more.

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The Appraisal Foundation seeks board candidates

The Appraisal Foundation is currently conducting its annual search for qualified candidates to serve on the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB). The AQB is responsible for establishing the minimum education, experience, and examination qualification criteria for real estate appraisers. The ASB is charged with developing, interpreting, and amending the Uniform Standards of Professional Appraisal Practice (USPAP). Familiarity with USPAP is a prerequisite of service on the ASB, and a minimum of 10 years of appraisal experience is required. Individuals selected for these positions will serve a term of one to three years starting on Jan. 1, 2018. The deadline for filing an application is Aug. 21, 2017.

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ASA issues new batch of CEIV credentials

The American Society of Appraisers (ASA) reports the latest individuals who have earned the new Certified in Entity and Intangible Valuation™ (CEIV™) certification. They are: Andrew Clausen (DS&B), Matthew Crane (Marshall & Stevens), Paul D'Arezzo (Ernst & Young), Andrew W. Johnson (Mile Marker Advisors LLC), Jason T. Kunkel (Ally), Kwok Yan Leung (American Appraisal China Limited—A Division of Duff & Phelps), Michael Lloyd (Duff & Phelps LLC), Myron A. Marcinkowski (Duff & Phelps LLC), Raymond D. Rath (Globalview Advisors LLC), Charles S. Sapnas (Valuation Research Corp.), and William Toce (Andersen Tax LLC).

BVWire congratulates these individuals! The CEIV credential is related to fair value for financial reporting, and it has been developed under a joint effort of the AICPA, ASA, and RICS. A set of best practices, the Mandatory Performance Framework, is required to be followed by all CEIV holders and should be followed by anyone doing this type of work. You can get the credential through the AICPA, ASA, or RICS, and there’s a special website where you can find more information.

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Expand your reach at the AICPA’s annual FVS conference in Vegas

Registration is now open for AICPA Forensic & Valuation Services Conference, which will be held November 13-15 at Caesar’s Palace in Las Vegas. BVWire attended last year, and we expect another excellent event. The theme this year is “Expand Your Reach,” and there will be something for both seasoned practitioners and those just starting out. If you go early, you can take either the ABV or CFF exam review course—or one of the preconference workshops: Data Analytics or Valuation Report Writing.

Special discounts: There’s an early-bird discount of $75 if you register before September 29. Plus, BVR has arranged with the AICPA for an extra discount of $100 for BVWire subscribers. Just use the code “LVH” when you register. See you there!

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Deep-dive M&A practice series in Chicago July 18-19

BVR is heading to Chicago to attend the first in a series of intensive day-and-a-half sessions called the M&A Practice Series on July 18-19. Conducted by the Alliance of M&A Advisors (AM&AA), the premier session is Best Practices to Manage and Grow Your M&A Business. The series will explore various aspects of building an M&A practice, including valuations. After this, the AM&AA 2017 Summer Conference will run July 19-21. BVR has arranged a 10% discount for BVWire readers—use the code “BVR” when you register (the discount is for the summer conference, not the M&A practice series event).

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A slew of new resources from BVR

BVR has been busy, adding new books and guides to its offerings. Here are the latest titles:

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Global BV News

Hong Kong tightens valuation regulations

The recent arrests of senior management of two valuation firms in Hong Kong by government anti-corruption forces has led the Securities and Futures Commission (SFC) to issue a Guidance Note on directors’ duties in the context of valuations in corporate transactions involving listed companies. The SFC also issued a circular to financial advisers regarding valuations in corporate transactions together with a statement on the liability of valuers for disclosure of false or misleading information.

The SFC has become increasingly concerned over some listed companies’ acquisitions of assets at unreasonably high prices or sales of assets that were substantially undervalued. As a result of some ill-advised transactions not in the best interests of shareholders, the Guidance Note reminds directors that they are the guardians of their listed companies’ assets and must ensure that acquisition targets are properly considered and investigated. The SFC also mentioned that valuers are expected to exercise the degree of skill and care ordinarily exercised by reasonably competent members of their profession. They should not knowingly or recklessly accept any assumption that is not reasonable and fair. Valuers may be liable if their valuation reports contain any materially false or misleading information. The SFC will take appropriate actions against those companies, directors, advisers, and valuers who fail to comply with their duties.

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BV movers . . .

People: Jeffrey Baliban is now a managing director in the Dispute Resolution Consulting practice within Financial Advisory Services at Houlihan Lokey, working in New York City … Anthony Creamer was named managing director in the forensic advisory services practice of Grant Thornton’s Philadelphia office. Grant Thornton also announced the hires of Christopher Hanson and Brian Sullivan as directors and Scott Peoples as senior manager … Bill Dempsey has joined the Boise, Idaho, office of CliftonLarsonAllenFlorin Dorobantu has been promoted to principal at Washington, D.C.-based firm The Brattle GroupLBMC announced the promotion of Lee Tabor and Katie Tarr to senior manager in the litigation valuation mergers and acquisitions department in its Nashville, Tenn., office, and Jordan Enix’s promotion to manager in the same department in the Knoxville, Tenn., office … Economic damages specialist Jeffrey George has been appointed partner at RGL Forensics in the Denver office … Kathy Johnson was elected chair of the California Society of CPAs. Johnson owns CPA Forensics Plus in San Bernardino … Suzanne Loomer, a partner at KPMG, was elected chair of The Canadian Institute of Chartered Business Valuators for 2017-18 … Robert Metcalf, a partner in MarksNelson’s Kansas City office, will serve a four-year term as Region 4 governor of the American Society of AppraisersStacey Udell has joined HBK Valuation in its Cherry Hill, N.J., office as the director of valuation and litigation services.

Firms: Bennett Thrasher followed up its new logo (mentioned in the March 24, 2017, BVWire) with a relaunch of its website at … St. Cloud, Minn.-based BerganKDV has acquired Beltz, Kes, Darling & Associates, a firm specializing in charter schools based in Farmington, Minn. Cincinnati-based Clark Schaefer Hackett has added LublinSussman, a firm based in Toledo, Ohio, effective July 1 … Portland, Ore.-based Columbia Financial Advisors announced the opening of its new Seattle office, with Nic Staloch joining as principal and office director … HiAccounting acquired fellow Hawaiian firm WR Financial, adding the latter’s employees to HiAccounting’s Honolulu office … K·Coe Isom has added Baer & Co., the former’s first expansion into Missouri … Southfield, Mich.-based Plante Moran was the only accounting firm named to the “100 Best Workplaces for Millennials” list by … Steger Gowie & Co., based in Chadds Ford, Pa., and Merves Amon & Barsz, based in Media, Pa., have merged to create a combined accounting firm, Barsz Gowie Amon & FultzThe Cleveland Plain Dealer named Walthall CPAs to the “2017 Top Workplaces” list. It’s the sixth time the Cleveland-based firm has made the list.

Please send your professional and firm news to us at

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Upcoming CPE events

Valuing a Business with BIZCOMPS: Considerations, Tips and Advanced Methods (July 13), with Toby Tatum.

Expert Toby Tatum shows you how to improve your database analysis skills in this practical session that can be applied to any data source.

Calculation or Full Valuation? What You Need to Know Now (July 20), with Jim Alerding (Alerding Consulting LLC).

Are you preparing calculations for some clients? Jim Alerding will provide an update on the current thinking related to calculations and their place in your practice.

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Business Valuation/Appraisal Standards Comparison Chart 2017

Not Knowing This Will Cost You Big Time

Two Truths and a Lie With Professor Aswath Damodaran

Your discussion could be featured here—BVR's LinkedIn group is a place for valuation professionals to share, discuss, and learn about compelling BV topics. If you're not already a member, request to join:

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In this issue:

CVFI credential

Tenn. DLOM

PCAOB proposals

Electrical firms

TAF board seats



M&A insights

New BVR resources

Global news

BV movers . . .

CPE events

LinkedIn discussions

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