Fair Value Measurement, 3rd Edition

APPENDIX 1AThe Mandatory Performance Framework

IN RESPONSE TO CONCERNS BY REGULATORS, the valuation profession formed the Fair Value Quality Initiative to provide a more “a more rigorous and uniform qualifications, training, accreditation and oversight of individuals conducting fair value measurements.”¹ One outcome of the initiative is the development of performance requirements for individuals performing valuations for financial reporting.

PERFORMANCE REQUIREMENTS

Financial reporting both within the United States and internationally has developed into a “mixed model,” in which some measurements are on a historical cost basis while other measurements are at fair value. As discussed in Chapter 1, fair value, although believed to provide better information for the user of the financial information, often requires more complex modeling and assumptions and incorporates more judgment about the measurement than traditional historical cost.

The valuation profession, through organizations such as the AICPA and the Appraisal Foundation, has developed best practices in valuations for financial reporting through the ACIPA's Accounting and Valuation Guides and the Appraisal Foundation's Fair Value Measurement Monographs. The publications of these organizations provide guidance about how to perform the fair value measurement.

The Performance Requirements workstream of the Fair Value Quality Initiative developed a framework about “how much” work should be done in developing the fair ...