A comprehensive guide for CPAs navigating the differences between GAAP financial reporting and professional valuation standards. Understand when each framework applies and how they impact business value determinations.
GAAP: Historical cost reporting and financial statement presentation for stakeholders.
Valuation: Determining fair market value for specific purposes like transactions, litigation, or tax matters.
GAAP: Historical transactions, verifiable data, neutral estimates.
Valuation: Market data, prospective analysis, hypothetical buyer/seller assumptions.
GAAP: Historical focus with periodic adjustments for impairment.
Valuation: Current market conditions and future earnings potential at valuation date.
GAAP requires fair value measurement for specific items:
Fundamental requirements for all business valuations including competency, independence, and due professional care.
Guidelines for applying asset-based valuation methods and adjusted net asset approach.
Documentation, reporting, and disclosure requirements for valuation engagements.
Application of marketability discounts, minority discounts, and control premiums.
Comprehensive standards covering engagement acceptance, valuation approaches, and reporting requirements.
Mandatory education and continuing professional development for certified valuators.
Clearly identify whether the engagement requires GAAP compliance or valuation standards before beginning work.
Maintain detailed documentation of which standards apply and why specific approaches were selected.
Obtain valuation credentials (ABV, CVA, ASA) to better serve clients requiring business valuations.
Partner with credentialed appraisers for complex valuations while maintaining GAAP compliance for financial reporting.
Monitor updates to both FASB standards and valuation professional standards including NACVA Professional Standards updates.
Implement review procedures to ensure appropriate standards are applied consistently across engagements.
Partner with a credentialed valuation professional (CVA, ASA, or ABV) who understands both GAAP requirements and valuation standards. Get reliable valuations that meet professional standards and serve your clients' needs.