Chapter 7

Valuation Issues and Considerations

This chapter undertakes a discussion of many of the significant issues related to employee stock ownership plan (ESOP)-based valuations for closely held companies. Such valuations have unique attributes that must be understood by professionals and business owners.

The AICPA has issued Statement on Standards for Valuation Services (SSVS) No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset (AICPA, Professional Standards, VS sec. 100). The AICPA Consulting Services Executive Committee has written this standard to improve the consistency and quality of practice among AICPA members performing business valuations. AICPA members will be required to follow this standard when they perform engagements to estimate value that culminate in the expression of a conclusion of value or a calculated value. SSVS No. 1 is effective for engagements accepted on or after January 1, 2008. SSVS No.1 is mentioned by reference only because it is beyond the scope of this chapter to discuss valuation standards.

The AICPA also supports the professional designation accredited in business valuation (ABV) that requires the holder to be both a CPA and a member of the AICPA. This valuation credential is popular among CPAs providing business valuations who are members of the AICPA. The ABV credential is not a requirement for CPAs providing business valuations because several professional valuation organizations provide business valuation ...

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