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Family Advocate

Business Valuations

The Alphabet Soup of Business Valuations

Joseph G Emanuele and Tracy Farryl Katz

Summary

  • The primary business valuation credentialing organizations in the United States are the American Society of Appraisers, the Association of International Certified Professional Accountants, and the National Association of Certified Valuation Analysts.
  • The total number of NACVA business valuation credential holders is more than AICPA and ASA credential holders combined.
  • Understanding the differences among the various business valuation credentialing designations helps in selecting the right professional to achieve equitable settlements.
The Alphabet Soup of Business Valuations
Photography taken by Mario Gutiérrez via Getty Images

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Family law engagements often require the valuation of closely held business interests. The process of business valuation is complex and requires specialized knowledge and experience. The primary business valuation credentialling organizations in the United States are the American Society of Appraisers (ASA), the Association of International Certified Professional Accountants (AICPA), and the National Association of Certified Valuation Analysts (NACVA).

Founded in 1952, the American Society of Appraisers is the only professional appraisal accrediting organization that offers credentials in all six appraisal disciplines: personal property, business valuation, real property, machinery and technical specialties, gems and jewelry, and appraisal review and management.

In the business valuation discipline, the American Society of Appraisers offers the Accredited Member (AM) and Accredited Senior Appraiser (ASA) designations, with the ASA being the most common. Candidates must complete a series of valuation courses with examinations, demonstrate five years of business valuation experience (two years for the AM), pass an exam on the Uniform Standards of Appraisal Practice (USPAP) and submit an USPAP compliant report for review. Holders of the AM and ASA credentials are required to complete 100 hours of continuing education and professional activities every five years. Of all the business valuation credential holders, ASA members are the only ones that must follow USPAP guidelines.

The Certified Valuation Analyst (CVA) designation is granted by the National Association of Certified Valuation Analysts. To earn the CVA designation, candidates must hold either an active CPA license or a business degree and be able to demonstrate substantial experience in business valuation. In addition, candidates must complete a five-hour proctored examination, complete a case study, or submit a recent valuation report, and submit professional and business references. Recertification is accomplished by completing between 36 and 60 hours of continuing education every three years. Prior to 2013, NACVA offered the CVA only to licensed CPAs, and offered the AVA (Accredited Valuation Analyst) to non-CPAs. In 2013, NACVA merged the two designations and now offers the CVA to both CPAS and Non-CPAs.

The Certified Business Appraiser (CBA) was introduced by the Institute of Business Appraisers (IBA) in 1978. In 2008, NACVA acquired the assets of the Institute of Business Appraisers, and until 2016, NACVA continued to offer and support the CBA designation. In 2016, NACVA suspended proliferation of the CBA, but still supports existing holders of the designation. Recertification requirements are the same as for NACVA’s CVA designation.

The Accredited in Business Valuation credential was introduced by the American Institute of Certified Public Accountants (AICPA) in 1998. Once only offered to licensed CPAs, the ABV credential is now offered by the Association of International Certified Professional Accountants (AICPA) to CPAs and other qualified financial professionals. Candidates must either be a CPA or hold a bachelor’s degree (or equivalent), pass the ABV exam (waived for ASA and CFA credential holders), and meet minimum experience and education requirements. Recertification is accomplished by completing 60 hours of continuing professional development every three years, with at least 10 hours completed annually, and completing a minimum of four hours of professional ethics education every three years.

Although exact counts are unknown, most recent estimates report that the total number of NACVA business valuation credential holders is more than AICPA and ASA credential holders, combined.

First introduced in 1963, the Chartered Financial Analyst (CFA) designation is offered by the Chartered Financial Analyst Institute. While primarily a credential for investment analysts and portfolio managers, the CFA program body of knowledge includes valuation topics. To qualify for the CFA charter, applicants must have a bachelor’s degree, pass a three-part examination, and have 36 months of relevant work experience. CFA Charterholders are encouraged, but not required, to complete 20 credits of continuing education annually.

The Institute for Divorce Financial Analysts (IDFA) offers the Certified Divorce Financial Analysis (CDFA) credential. According to the IDFA website, the role of the CDFA is “is to assist the client and his/her lawyer to understand how the financial decisions he/she makes today will impact the client’s financial future.” The IDFA website lists serving as an expert witness in the long list of services a CDFA may be asked to perform.

The CDFA credential can be awarded to individuals with or without a bachelor’s degree and requires three to five years of relevant experience, which can include financial planning, family law practice, investment advising, real estate lending, life and disability insurance, financial therapist, or financial coachiing roles. Candidates must also pass an exam that covers a variety of family law and financial topics. To maintain the CDFA designation, holders must complete 30 hours of divorce-related continuing education every two years.

Business valuation in family law engagements requires specialized expertise and credentials. Understanding the differences among the various designations helps in selecting the right professional to achieve equitable settlements.

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