Q&A: Top issues in business valuation

Experts discuss topics ranging from changes in fair value measurements to the retirement of the Baby Boomer generation.

Business valuation experts have been practicing in an evolving landscape for the past several years. New standards, changing technology, and an aging population are all playing a part in effecting changes.

The JofA organized a round-table discussion of the important issues affecting CPAs who advise clients on business valuation matters. The participants discussed issues such as the effect of the AICPA’s new Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs) on fair value determinations, the opportunity presented by the potential demand for valuation services as Baby Boomer business owners near retirement, and the need for valuation practitioners to take on a broader advisory role.

Participating in the round table were:

  • Rosanne Aumiller, CPA/ABV/CFF, a director at BBP Partners.
  • Nathan DiNatale, CPA/ABV, a senior manager at SC&H Group.
  • Randie Dial, CPA/ABV/CFF, a partner with CliftonLarsonAllen.

The following is an edited transcript of the discussion:

What are the emerging trends that you’re seeing in business development right now?

Dial: I’m seeing clients wanting more than you just being a valuation guy. They want someone that’s going to come in and be more of an adviser and maybe consult with them on ways to create value.

The other big area that I’m seeing is more and more industry specialization in a lot of the proposals I get. Clients and prospects want more and more expertise within certain industries. An example would be financial institutions. If you have not done a financial institution engagement, you’re not likely going to get that engagement.

DiNatale: I see the same thing out there with respect to industry specialization. In addition, I frequently see clients that are referred for valuation work where, upon talking to the client, it’s not really valuation they are looking for. Rather, it’s how can they prepare themselves to potentially sell the company? While they are thinking valuation, what they really need is advisory services. I end up referring them to our capital practice that helps them on an advisory side [with valuation calculations] as opposed to just performing a full blown SSVS1 [Statement on Standards for Valuation Services No. 1] report.

What are the latest developments and challenges with fair value measurements?

DiNatale: I think the most current item facing fair value measurements is how the AICPA Financial Reporting Framework for the Small- and Medium-Sized Entities is going to affect our work moving forward. From a fair value perspective, talking about purchase price allocations and goodwill, I’ve seen quite a roller coaster ride over the past years, probably five or six years, where it was real heightened up until the decline in 2008 and 2009 where we were getting hammered with goodwill impairments. Then we hit a lull after that where we were not [getting] any new work as it relates to that [goodwill impairments], and it has kind of slowly crept back up. I also think the introduction of the [FRF for SMEs] will be another challenge to get past for those of us dealing in fair value. For example, those privately held smaller companies were required to complete a goodwill impairment test on an annual basis. The FRF for SMEs would permit the amortization of goodwill and therefore eliminate the need for an annual impairment test.

Dial: Assuming fair value measurements are going to continue into the future, I’d say one of the biggest challenges for us is dealing with the latest developments and just keeping up on staying educated on a lot of the new methodologies and things that go on within the field. Some examples would be, just in the last couple of years, guides have been issued on contributory charges and customer relationships. There’s also one on contingent consideration. So it’s a very difficult thing for fair value practitioners to make sure they’re on top of all the newest methodologies and thinking.

How will the current proposal on fair value accounting for private companies impact the work you do for private companies?

DiNatale: I think that it is going to impact the overall number of valuations that we end up doing, to the extent some of those are small businesses. We were affected somewhat by the Level 1 goodwill impairment test, or the pre-Level 1, whereby companies were doing their own analysis, and we were actually assisting. Those cases eliminated the need for additional valuation services in the form of an annual impairment test altogether. And with the FRF for SMEs, I think we will feel the impact a little bit more from a smaller company side. So, to the extent that you perform services for companies that were on the smaller side, you may not see those opportunities anymore.

Dial: Obviously, there’s a lot going on in this area. There are exposure drafts out regarding changes to goodwill impairment and also business combination work for private companies. [See the sidebar, “Changes on the Horizon?”] I think on the smaller company side, we’re going to see some impact on the amount of work getting done. What that is remains to be seen.

There has also been mention of public companies within that exposure draft, and if something gets passed on the private side, what’s going to happen on the public side? I think one big thing to think about as you’re going through this proposal and exposure draft is, what does it all mean from a convergence standpoint with IFRS as well?

I think we’re all under the impression that we’re trying to converge with IFRS, and certainly, taking fair value out of the framework, if you will, is not going to achieve that. So there are a lot of question marks right now, but certainly there are a lot of moving parts to pay attention to.

What do you see happening with business succession in the next five to 10 years as Baby Boomers, both those working at business valuation firms and at companies those firms provide services to, retire?

Aumiller: I think that there are less and less people below me, so to speak, that are interested in doing this kind of work. I don’t see a lot in our pipeline. I think for 15 years business valuation was an emerging practice area for CPA firms, and now we’ve sort of matured in that area. And so we need to keep making sure that we recruit individuals who are going to take over for us.

Dial: When I see this question, opportunity is what pops into my mind. I was recently looking at statistics about how many companies out there will liquidate or look for an exit event within the next five to 10 years. And it’s staggering. With this Baby Boomer generation, you have so many business owners out there that are going to be looking at liquidating their nest egg. They have all their wealth tied up in their business, and they’re going to need some type of exit.

And what an opportunity that presents to the business valuation community from a consulting standpoint, because those individuals are going to need help getting to that point, possibly creating value and helping them get ready for sale. Who are they going to sell to? Private-equity firms? Strategics? Family members? There are so many scenarios out there and so many prospects and clients dealing with this. It’s just a staggering opportunity for the valuation field to start really taking advantage of, in my mind.

What are the latest opportunities and challenges that you’re seeing in regard to technology?

Dial: You know, really, the thing I thought of here was making sure you’re staying ahead of the curve on the most up-to-date research tools and databases that keep coming out. I notice every year at the valuation conference there are more and more vendors, it seems, and new companies. The other thing I’ve really noticed is that valuation is becoming more complex as complex securities within some of these fair value engagements need to be prepared. And then contingent consideration, and a lot of the simulation, and just these real complex models are being developed. Trying to keep up with all of that stuff is very tough.

Aumiller: I’m of a certain age—I won’t tell you how old I am, but I’m one of those who can now say I’m old and I’m working with attorneys of a certain age that are five to 20 years older than me who don’t use technology.

And I have appreciation of their way of doing things, [but] I think some younger staff may not because they’ve always had technology in their life. But I work with people who don’t even use email sometimes. They send everything first-class mail or by courier. They bring lots of paper and boxes of files to court, for example.

You don’t want to alienate your attorney or your business owner or client. And you have to be a little bit patient, and I think try to teach some of our staff how to bridge that gap and how to be more understanding. … I think attorneys that are older and have great client bases because they’ve been so established, they’re willing to work more with people that have that type of attitude. So I think going backward with regard to technology is as important as going forward and looking to all the latest and greatest.

Changes on the Horizon?

GAAP exceptions for private companies that FASB and the Private Company Council (PCC) are considering include:

  • A proposal that would relieve private companies from having to separately recognize certain intangible assets acquired in a business combination.
  • A proposal that would permit amortization of goodwill (the residual asset recognized in a business combination after recognizing all other identifiable assets acquired and liabilities assumed), and a simplified goodwill impairment model.

FASB and the PCC were scheduled to discuss public comments on the proposals Oct. 1. Following that discussion, the PCC would have the opportunity to consider changes to the proposals and vote on them. FASB would make the final decision on endorsement before exceptions for private companies are written into GAAP.


Clients want practitioners to be more than just valuation services providers. They want someone who can be more of an adviser and consult with them on ways to create value.

Practitioners are keeping an eye on the current proposal on fair value accounting for private companies. The proposal could impact the amount of business valuation work that is available. 

Baby Boomer business owners are or will soon be looking to liquidate their nest egg. That presents a great business development opportunity to the business valuation community.

Even though technology is transforming the way many CPAs operate, some accountants, lawyers, and clients are sticking to the old ways of doing things. Business valuation practitioners need to be prepared to work with both types of colleagues and clients.

Chris Baysden is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at cbaysden@aicpa.org or 919-402-4077.


JofA articles


  • Business Valuation Practice Management Toolkit (#PPM1208P, paperback; #PPM1211E, ebook; and #PFVSBVTO, one-year online access)
  • Forensic and Valuation Services Collection (#PFVSCOLLO, one-year online access)
  • Valuation of Privately-Held-Company Equity Securities Issued as Compensation, Accounting and Valuation Guide (#AAGSTK13P, paperback; #AAGSTK13E, ebook; and #AAGSTKO, one-year online access)
  • Understanding the Financial Reporting Framework for Small- and Medium-Sized Entities, AICPA Alert (#AFASME13P,  paperback; #AFASME13E, ebook; and #AFASMEO, one-year online access)

CPE self-study

  • Fair Value Accounting: A Critical Skill for All CPAs (#733306)
  • Introduction to Business Valuation: An Overview of the Business Valuation Process (#745784)
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  • Valuation (#154150, on-demand)


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FVS Section and CFF and ABV credentials

Membership in the Forensic and Valuation Services (FVS) Section provides access to specialized resources in the forensic and valuation services discipline areas, including practice guides. For more information, visit the FVS Center at aicpa.org/FVS. Members with a specialization in financial forensics may be interested in applying for the Certified in Financial Forensics (CFF) credential. Information about the CFF credential is available at aicpa.org/CFF. Members with a specialization in business valuation may be interested in applying for the Accredited in Business Valuation (ABV) credential. Information about the ABV credential program is available at aicpa.org/ABV.

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