Accredited In Business Valuation
a designation held by Certified Public Accountants and other valuation professionals who have satisfied certain skill, education, and experience requirements.
Accredited in Business Valuation Details
Simply put, business valuation is how you determine the value of a business. While it follows a system, it ultimately depends on the expert judgment of the professional who performs the job based on several factors, such as the nature of the business, the economic environment, and values of assets and liabilities.
Exclusively conferred by the American Institute of Certified Public Accountants (AICPA), an ABV credential builds on a valuation professional’s abilities, allowing them to provide a broader and deeper scope of services to their clients. Users of these services generally view the ABV credential as a testament to the experience, expertise, and integrity of those who conduct the valuations, whether the valuation involves a business, security, intangible asset, or any other property.
The AICPA used to award the ABV credential only to Certified Public Accountants (CPA) but have recently offered it to other professionals who qualify based on the institute’s stringent criteria. With the ABV credential made accessible to non-CPAs, the AICPA acknowledges that the field is open to all qualified professionals with varied backgrounds.
Example of Accredited in Business Valuation
There are many ways to determine the value of a business, but the most common methods are those that are based on Income, Assets, Profits, and Sales. Calculations are also likely to produce different results. This is why an owner seeking a valuation, regardless of the reason, should try all the methods and then decide which price to use.
Say, Company A wants to know how his business is comparing with his competitors, starting with Company B. Since Company A is particularly concerned with their Sales, its valuation will begin with the Sales approach.
After a little research, Company A discovers that Company B made sales of $3,000,000 and has been acquired for half that amount. This means if Company A has sales of $2,000,000, the 0.5x multiple can be used to derive a $1,000,000 valuation.
Later in the process, Company A realizes that there are inconsistencies with the Sales approach when they used it on Company B. For example, it turns out that Company B is a sold company, so they have varying profits or cash flows. There is also the issue of Company B's new owner paying a price for the acquired company's intellectual property and other valuable assets. Company A then decides to use the other valuation methods to get a more accurate result.
In any case, the comparison between Company A and Company B will only be accurate, valid, and useful if the two companies are direct competitors. Otherwise, the result can be misleading and give rise to decisions that are not based on the true state of competition between the two businesses.
Significance of Accredited in Business Valuation in the Future
Financial data experts are ever more critical of the relevance and reliability this term has today. Accounting has never defined income directly as added wealth or value, but instead as a set of traditions that quantify how costs have been allocated. The good news is that things are changing. They're now giving greater weight to fair value and measurement standards.
Still, you can't deny that finding valid information is still a challenge for financial analysts and market specialists. The Public Company Accounting Oversight Board (PCAOB) focuses on making reliable information more accessible. This is thanks to legislation like the Sarbanes–Oxley Act of 2002 (also known as the Public Company Accounting Reform and Investor Protection Act).
At the same time, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working to promote fair value accounting and principles-based standards. They believe it's their obligation to make financial records relevant instead of sitting unwanted on dusty shelves.