Chapter 1: Professional Standards, The Engagement, and Standards of Value

Question 1

What are the two AICPA VS sections governing Professional Standards?

Answer 1

VS 100 and 9100

Question 2

According to VS what is determining fair value?

Answer 2

The act or process of using professional judgement and valuation approaches and methods to estimate the value of a business, ownership interest, security, or an intangible asset.

Question 3

Two types of engagements to estimate value

Answer 3

Valuation and Calculation

Question 4

Valuation Engagement

Answer 4

An engagement to estimate value in which a valuation analyst determines an estimate of the value of a subject interest by performing appropriate valuation procedures as outlined by the AICPA

Question 5

Which valuation approach can you use for a “Valuation Engagement”

Answer 5

Any deemed appropriate

Question 6

Does a “Valuation Engagement” need to determine a single value?

Answer 6

No, a range or value or single value can be determined

Question 7

Calculation Engagement

Answer 7

An engagement to estimate value where the valuation analyst and client agree on the specific valuation approaches and valuation methods that the analyst will use and the extent of procedures the analyst will perform.

Question 8

Does a “Calculation Engagement” include all the valuation procedures required for a “Valuation Engagement”?

Answer 8

No

Question 9

If a “Valuation Engagement” was performed instead of a “Calculation Engagement” could the result be different?

Answer 9

Yes

Question 10

Does a “Calculation Engagement” need to determine a single value?

Answer 10

No, a range of value or single value can be determine

Question 11

What are the 4 types of Business Valuation Reports?

Answer 11

1. Valuation engagement DETAILED report
2. Valuation engagement SUMMARY report
3. Calculation engagement CALCULATION report
4. Oral report, must encompass one the the other three reports

Question 12

Gift and estate tax SOV

Answer 12

FMV

Question 13

Inheritance taxes SOV

Answer 13

FMV

Question 14

Ad valorem taxes SOV

Answer 14

FMV

Question 15

ESOP SOV

Answer 15

FMV

Question 16

Financial acquisitions SOV

Answer 16

FMV

Question 17

Dissenting stockholder action SOV

Answer 17

Legal FV

Question 18

Corporate or partnership dissolution under minority oppression statues SOV

Answer 18

Legal FV

Question 19

Strategic acquisition SOV

Answer 19

Investment value

Question 20

Buy-sell agreement SOV

Answer 20

any the parties agree on

Question 21

Martial dissolution SOV

Answer 21

No standard, look to relevant case law

Question 22

FASB compliance SOV

Answer 22

Accounting fair value

Question 23

What is the concept of valuing a subject in the manner in which it would generate the greatest return, taking into account what is physically possible, financially feasible, and legal?

Answer 23

Premises of value

Question 24

Four types of Premises of value

Answer 24

1. Going Concern
2. Orderly liquidation
3. Forced liquidation
4. Assembled group of assets