In the works for several years, a new credential in fair value measurement was unveiled by the American Institute of CPAs (AICPA), American Society of Appraisers, and the Royal Institution of Chartered Surveyors on Jan. 10.
The three organizations have been working together since 2013 to develop a credential that provides a consistent framework around fair value measurement.
The resulting credential, Certified in Entity and Intangible Valuations (CEIV), provides uniform guidance on documentation needed to support fair value measurement results in company financial statements for entity and intangible asset valuations. Intangible assets include trademarks, patents and technology, customer sales lists, and noncompete agreements.
As a result, investors, auditors, and regulators are expected to better understand how fair value measurements were determined in valuing businesses and intangible assets.
Credential holders will be monitored to ensure proper use and compliance with the mandatory performance framework.
“The quality oversight of credential holders will provide clients, regulators, auditors, investors, and the public greater confidence that they are receiving accurate information in financial statements when fair value measurements are performed by someone holding the CEIV credential,” Susan Coffey, CPA, CGMA, executive vice president for public practice at the AICPA, said in a prepared statement.
To obtain the CEIV credential, finance professionals must meet eligibility requirements determined by the three organizations, which also collaborated with such groups as the Appraisal Foundation and the International Valuation Standards Council in the development process.
Requirements include demonstrating competencies in valuation and fair value measurement through training and assessments, and passing a two-part CEIV exam that will be introduced early this year.
The move surely comes as no surprise to finance professionals, as it’s been discussed annually for several years at major professional conferences. US Securities and Exchange Commission (SEC) Deputy Chief Accountant Paul Beswick called for a “building of public trust” in the valuation profession during a speech at an AICPA conference in 2011.
Beswick recommended a single set of qualifications in education, work experience, continuing education requirements, standards of practice and ethics, and a code of conduct. He also suggested that an inspection and disciplinary process would encourage compliance and enforcement.
“Recent events and developments, chief among them the broadening application of fair value and fair value-based measures in US GAAP in recent years and the 2008 financial crisis, have cast the spotlight on valuation professionals,” said Beswick, who left the SEC in 2014.
Valuation professionals stand apart from other professionals in financial reporting because of a lack of “unified identity,” Beswick said. They can choose from among five business valuation credentials through four organizations that each have different criteria. But none of the credentials is actually required, he said, adding that the fragmentation creates gaps in what’s expected among valuators, management, auditors, standard-setters, and regulators.