Statement on Standards for Valuation Services

Statement on Standards for Valuation Services No. 1 (SSVS No. 1) SSVS No. 1 is a professional standard issued by the American Institute of Certified Public Accountants (AICPA) that establishes standards for valuation services performed by AICPA members. The standard applies to all engagements to estimate the value of a business, business ownership interest, security, or intangible asset for a variety of purposes, including sales transactions, financing, taxation, financial reporting, mergers and acquisitions, management and financial planning, and litigation. Scope SSVS No. 1 applies to all AICPA members who perform valuation services. The standard does not apply to engagements that are limited to providing accounting, auditing, tax, or consulting services. Types of Engagements Three types of engagements can be performed under SSVS No. 1:

• Valuation engagement: An engagement to estimate the value of a business, business ownership interest, security, or intangible asset.
• Limited valuation engagement: An engagement to estimate the value of a business, business ownership interest, security, or intangible asset for a specific purpose, such as a tax return or a financial statement.
• Consulting engagement: An engagement to provide advice or assistance on valuation matters, but not to estimate the value of a business, business ownership interest, security, or intangible asset.

Valuation Methods and Approaches There are three primary valuation methods:

• Income approach: This approach estimates the value of a business or asset based on its future income-generating potential.
• Asset approach: This approach estimates the value of a business or asset based on the value of its underlying assets.
• Market approach: This approach estimates the value of a business or asset based on the prices of similar businesses or assets that have been recently sold.

The valuation approach that is used will depend on the specific engagement and the purpose of the valuation. For example, the income approach is often used to value businesses that are expected to generate significant future income. The asset approach is often used to value assets that have a readily identifiable market value. The market approach is often used to value businesses and assets for which there is a significant amount of comparable market data. Valuation Report A valuation report should include the following information:

• The purpose of the valuation
• The date of the valuation
• The valuation method(s) used
• The key assumptions and inputs used in the valuation
• The conclusion of value

The valuation report should also include a discussion of the following:

• The risks and uncertainties associated with the valuation
• The limitations of the valuation
• The qualifications of the valuation analyst

Conclusion SSVS No. 1 is a comprehensive professional standard that establishes standards for valuation services performed by AICPA members. The standard applies to a wide range of engagements and valuation methods. A valuation report should include all of the relevant information to enable users to understand the valuation and the conclusion of value. Additional Information In addition to the information provided above, here are some additional details about SSVS No. 1:

• The standard requires valuation analysts to have the necessary professional competence to perform valuation engagements.
• The standard requires valuation analysts to comply with the AICPA Code of Professional Conduct.
• The standard requires valuation reports to be written in a clear and concise manner.
• The standard requires valuation reports to be objective and unbiased.
• The standard requires valuation analysts to disclose their qualifications and any potential conflicts of interest.

SSVS No. 1 is an important standard that helps to ensure that valuation services performed by AICPA members are of high quality. The standard provides guidance on a wide range of valuation topics, including the scope of valuation engagements, the types of valuation methods that can be used, and the content of valuation reports.  

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