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What are business valuation standards?

Business valuation standards

Business valuation standards describe the standards applied by outside advisers engaged to value a business. The best-known are those promulgated in the United States by the professional bodies concerned, but similar rules are applied elsewhere in the world to maintain the integrity of business valuation.

Where have you heard about business valuation standards?

As an investor, you may have come across references to business valuation standards in the reports of the companies in which you are invested, should one or more such companies have needed a valuation of all or part of its business.

What you need to know about business valuation standards.

Business valuation standards are codes of conduct governing those who are hired to put a value on businesses. Best-known are those issued by the American Society of Appraisers (ASA), the National Association of Certified Valuation Analysts and the American Institute of Certified Public Accountants. While they, and similar codes in other countries, vary, all tend to stress the need for the valuer to be independent, that they be transparent about their sources of information, that their method of payment not provide incentives to alter the value either up or down and that their reports meet minimum standards of thoroughness. The ASA says its standards are designed 'to maintain and enhance the quality of business valuations for the benefit of the business valuation profession and users of business valuations'.

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