Review the Statement on Standards for Valuation Services No. 1 and address the following issues:
1) What is the scope of this standard?
2) Describe the types of engagements that can be performed.
3) Describe different valuation methods and approaches.
4) Describe how a valuation report is presented.
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 Methods and Approaches
There are three primary valuation methods:
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 valuation report should also include a discussion of the following:
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:
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.