The International Valuation Standards Board (IVSB), a board of the International Valuation StandCards Council (IVSC) met in public meeting format on May 4-5, 2011 in London. Richard Berkemeier, ASA (machinery & technical specialties) and Chris Mercer (that’s me) (business valuation, of course) were attending and representing the American Society of Appraisers.
While there was a complete agenda for the meeting, the item, “Review and Approval of New International Valuation Standards,” was of most interest to me.
The IVSB worked on a document entitled “Staff Draft, Proposed Revised International Valuation Standards, Issued 14 February 2011” (“the Staff Draft”). The Staff Draft was issued following the release of an Exposure Draft of Proposed International Valuation Standards issued June, 2010 (“the Exposure Draft”).
The American Society of Appraisers responded to the Exposure Draft in a letter dated September 2, 2010. Numerous other appraisal organizations and interested parties responded as well. During October 2010, the IVSB met to review the Exposure Draft and the various comments. The Staff Draft noted above was the result of the Board’s responses to the various comments received and the IVSC staff’s redrafting according to the Board’s deliberations in October 2010 (and as I understand, in other meetings by telephone since then).
The IVSB meeting was chaired by Steven Sherman in his first public meeting as the new chair. In his “day job,” Mr. Sherman is head of valuation worldwide for KPMG. The former chair, Chris Thorn, stepped down to take the new and greatly needed position of Technical Director of the IVSC. Mr. Sherman welcomed the public attendees, which included representatives of a number of appraisal organizations and one appraisal firm:
- Richard Berkemeier and Chris Mercer (me), representing the American Society of Appraisers
- Jeannine Brooks and Eleanor Joy (President and Vice-Chair of the Canadian Institute of Chartered Business Valuators
- David Park (Chair, RICS Valuation Standards Board)
- Bill Garber (Director of Government and External Relations, Appraisal Institute)
- Joao Carlos Mynarski and Ricardo Calfat Disessa (Both with Mynarski International Valuation, Brazil)
All of the Board members were present for the meeting. Chris Thorn, Technical Director, and Marianne Tissier, Executive Director of IVSC were also present. Jenni Adamstein of KPMG was also present.
After addressing the other agenda items, the Board tackled the Staff Draft, together with additional comments from previous telephone meetings and additional staff work.
The debate over issues, language, and concerns was spirited and respectful. The Board did not quite complete its review of the Staff Draft, and the public meeting was continued until Saturday morning, May 5th, with all attendees being invited back for the concluding session.
Getting into the details of the Board’s discussion is beyond the scope of this post. We will attempt to summarize the results of the deliberations when another Exposure Draft is issued or, when the Board approves the new IVS with the changes it agrees to based on the public exposure process.
Mr. Sherman was kind enough to provide the public attendees with an opportunity to make brief comments to the Board at the end of the day on Friday, March 4th. All the comments were respectful and the commenters were appreciative of the Board’s and the IVSC’s hospitality.
Significantly, all those who commented suggested to the Board that at least one more Staff Draft be published for public comment before the new IVS are finalized. Some public participants had to depart before the comments were made. I have done my best to correctly report or summarize the comments that were made.
David Park made the following suggestions:
- The Board had indicated that a few controversial issues might be footnoted, indicating that future consideration by the Board would be forthcoming. Mr. Park suggested that footnoting be kept to a minimum because it creates uncertainty regarding the standards.
- More work needs to be done to get all appropriate definitions in the new IVS.
I made the following comments and/or suggestions:
- The Staff Draft continues to use the term “basis of value” rather than the more widely known and understood term, “standard of value” to define the kind of value that is being determined. I asked for further consideration of the better-known term.
- It would be good if the Board would consider utilizing the definitions found in the International Glossary of Business Valuation Terms, as appropriate, since these definitions have been vetted and approved by five major appraisal organizations and are widely known and used in North America and elsewhere where the standards of the various organizations are employed. These terms are incorporated in the ASA Business Valuation Standards of the American Society of Appraisers.
- One of the stated goals of the IVSB has been to foster convergence with world valuation standards. It would be good to see a greater effort on the part of the IVSB to embrace the highest qualities of major standards, including the Uniform Standards of Professional Appraisal Practice (The Appraisal Foundation), the ASA Business Valuation Standards (American Society of Appraisers), Statement on Standards for Valuation Services 1 (SSVS-1, American Institute of Certified Public Accountants), and the Practice Standards (Canadian Institute of Chartered Business Valuators).
- I further suggested that the Board consider creating Advisory Committees for the major valuation disciplines; including business valuation and real estate (I’ll add personal property at this time). These (volunteer) committees would be able to do the detailed vetting of the standards so necessary for consistency, internal integrity, and external clarity, and to make recommendations to the Board for its consideration.
Richard Berkemeier embraced my comments and endorsed them to the Board. In addition, he noted that when the new IVS are published, it will be necessary and appropriate to develop a means of educating valuers regarding the new standards through appropriate in-person and internet-based delivery mechanisms.
Bill Garber made the following comments:
- Endorsed the idea of Advisory Committees.
- Encouraged more formal means of communications between the IVSC and its sponsors.
- Offered assistance from the Appraisal Institute in staffing (volunteers) and researching for specific projects.
- Expressed concern that the new IVS will likely allow firms to sign valuation reports and representations regarding competency and independence. Mr. Sherman pointed out that while firms can sign, so can individuals.
We will know shortly what decision the IVSB made regarding either publishing the new IVS without further comment or offering another Staff Draft (or Exposure Draft) for additional public comment prior to finalization.
In either event, the new International Valuation Standards are indeed advancing.