Business Valuation

IX. Business Valuation Standards & Code of Ethics

1. What practice standards and/or code of ethics are business appraisers required to follow?

   In general, USPAP has developed standards for all appraisal disciplines. Standards 9 and 10 , recently modified as of January 1, 2000, of USPAP Standards apply specifically to business valuation. Appraisals that will be utilized by lending institutions backed by federal agencies are required to comply with USPAP. Many of the appraisal societies require their appraisers to follow USPAP guidelines regardless as to the use of the appraisal.

   Each of the appraisal societies have developed practice standards and code of ethics for their members to follow when conducting business appraisals. In most cases, the appraisal societies have their practice standards and code of ethics on their Websites.

   The practice standards developed by the Business Valuation Committee for ASA members can be found in the bibliography section of this BV Website.

   Other governmental agencies that have developed appraisal regulations or guidelines that impact business appraisers and business appraisals include:

   • Revenue Rulings promulgated by the Internal Revue Service
   • The Department of Labor has developed regulations applicable to appraisals involving employee benefit plans.

2. Has the government established any standards with regards to valuing businesses?

   Governmental agencies or agencies regulated by governmental agencies include the following:

   • The Appraisal Foundation - The Financial Institution Reform, Recovery and Enforcement Act (FIRREA) makes compliance with USPAP mandatory for all federally related real estate transactions. Although not currently mandatory for personal property and business appraisals, USPAP has been adopted by the major appraisal organizations in North America and has become widely recognized as the generally accepted standards of appraisal practice.
   • The Internal Revenue Service has developed numerous standards or guidelines with regard to valuing businesses applicable to valuations involving taxation issues that include employee benefit plans, estate planning, income taxes, and allocation of assets for depreciation and amortization.
   • The Department of Labor has developed guidelines required to be followed when conducting appraisals involving employee benefit plans.

3. Does the Uniform Standards of Professional Appraisal Practice (USPAP) apply to the valuation of businesses?

   In general, USPAP has developed standards for all appraisal disciplines. Standards 9 and 10 , recently modified as of January 1, 2000, of USPAP Standards apply specifically to business valuation. Appraisals that will be utilized by lending institutions backed by federal agencies are required to comply with USPAP. Many of the appraisal societies require their appraisers to follow USPAP guidelines regardless as to the use of the appraisal.

4. Where can I get information about the Uniform Standards of Professional Appraisal Practice (USPAP)?

   The Appraisal Foundation
   1029 Vermont Avenue, N.W., Suite 900
   Washington, DC 20005
   202-347-7722
   www.appraisalfoundation.org