Business Valuation


SSARS ED Issued on Business Valuation Financial Statements

The accounting and review services committee issued in late December a proposed Statement on Standards for Accounting and Review Services (SSARS) titled Financial Statements Included in Written Business Valuations.

The proposed SSARS exempts “normalized financial statements”—which it defines—and historical financial statements from the requirements of SSARS 1, Compilation and Review of Financial Statements.

Generally, valuation professionals use financial statements only to develop and present their appraisal of a business’s value. For this reason, they need not, and often fail to, comply fully with GAAP or an other comprehensive basis of accounting (OCBOA). The committee therefore has issued this ED to exempt such statements from the provisions of SSARS no. 1, which requires compliance.

The ED defines “normalized financial statements” as financial statements that contain “necessary and appropriate adjustments in order to make an entity’s financial information more meaningful when presenting and comparing on a consistent basis the financial results of that entity to those of a comparable entity as part of a business valuation engagement.”

The exposure draft can be viewed at www.aicpa.org/members/div/auditstd/3bvexec.htm. The committee is accepting comments on it until June 9, 2000.

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