Certifications

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When selecting a business valuation expert, it is important to consider an appraisers' credentials and experience. A comparison of the five primary business valuation designations is shown below.

Comparison of the Five Primary Business Valuation Designations

	American Society of Appraisers (ASA)		Institute of Business Appraisers (IBA)	American Institute of Certified Public Accountants (AICPA)	National Association of Certified Valuation Analysts (NACVA)
Designation	Accredited Senior Appraiser	Accredited Member	Certified Business Appraiser	Accredited in Business Valuation	Certified Valuation Analyst
Acronym	ASA	AM	CBA	ABV	CVA
Education	College Degree or Equivalent	College Degree or Equivalent	College Degree or Equivalent	College Degree	College Degree
Other Credentials Required	None	None	None	CPA	CPA
BV Experience Requirement	5 Yrs Full-Time Appraisal Experience	2 Yrs Full-Time Appraisal Experience	90 hr classroom requirement or 10,000 hrs active experience	Provide evidence of involvement in 10 business valuation engagements	None
Coursework and Exam Requirements	Successful completion of four 27 hr society training courses with exams at the end of each	Successful completion of four 27 hr society training courses with exams at the end of each	Successful completion of a 6 hr proctored exam (waived for individuals holding the ASA designation)	Successful completion of an 8 hr proctored exam	Attendance of a 40 hr society training course and successful completion of a four hour proctored exam and a take home case study examination
Peer Report Review	Yes, 2 reports	Yes, 2 reports	Yes, 2 reports	No	No
Continuing Education Requirements	100 hrs every 5 years	100 hrs every 5 years	24 hrs every 2 years	60 hrs every 3 years	36 hrs every 3 years
Ethics Exam	Yes	Yes	No	No	No
Uniform Standards of Professional Appraisal Practice (USPAP) Exam	Yes	Yes	Yes	No	No

As you can see from the chart above, the ASA designation is often viewed as the premier designation for business valuation because of the significant experience, education and report review requirements.

The credentials and experience of an appraiser are two of the most important areas of consideration when hiring a business appraiser. This is particularly true when the appraisal may be challenged (i.e. tax valuations, ESOP valuations, divorce valuations). A number of court cases over the years have commented on the inadequacy of a business appraiser's training, certification and competence to testify as a business valuation expert. A few of these cases are listed below:

Court Cases Where the Court Considered the Business Valuation Expert Unqualified

Estate of Joyce Hall, 92 T.C. 312, 336 (1989)
Estate of Margaret Jann, T.C.M. 1990-333 CCH Dec. 46,692 (1990)
Estate of Berg v. Commissioner, T.C.M. 1991-279, June 20, 1991
Laureys v. Commissioner, 92 T.C.M. 101, 126-129
Estate of Samuel J. LeFrak and Ethel LeFrak v. Commissioner, T.C.M. 1993-526, filed 11-16-93
Frymire-Brinati v. KPMG Peat Marwick, 3 F.3d 183 (7th Cir. 1993)
Estate of Ray A. Ford, v. Commissioner, T.C.M. 1993-580, filed 12-8-93
Mad Auto Wrecking, Inc. v. Commissioner, No. 1950-94, T.C.M. 1995-153, filed 4-5-95
Pabst Brewing Company v. Commissioner, No. 18466-92 (USTCM) 1996-506
Furman v. Commissioner, Nos. 11568-96 - 11569-96, 1998 WL 209265 (U.S. Tax Court, 4-30-98)
Andrew J. Whelan, et al. v. Tyler Abell, et al., USDC, Dist. of Columbia, Civil Action Nos. 87-442 & 87-1763 (SS)
Dockery v. Commissioner, No. 14915-96, 1998 WL 120369 (U.S. Tax Court, March 19, 1998)
In Re MED DIVERSIFIED, INC., 2005 Bankr. LEXIS 2236 (Bankr. E.D.N.Y. November 14, 2005).

In general, the Court considers (i) the credentials of the appraiser, (ii) the experience of the appraiser (whether or not the appraiser performs business valuation on a full-time basis) (iii) whether or not the appraiser is independent in appearance and fact (not an advocate) and (iv) the training, education of the individual and their membership in various professional valuation organizations.

The advice I always give to prospective clients (or their attorneys or CPA's) is when selecting an appraiser be sure to use an individual with the ASA credential. It is the best way to make sure that the individual performing the valuation has received adequate training, has sufficient experience (a minimum of five years full-time) and that you will receive a high quality report (have passed an appraisal peer review requirement).