CBA, ASA, ABV, CVA . . . welcome to the jungle of business valuation designations. While the three letter abbreviations may seem impressive, not all designations are alike. They vary in degrees of difficulty in experience, prerequisites and exams.
In the field of business valuation, there are no licensing requirements or specific college degrees. As such, over the last 30 years, the industry has gradually realized the necessity in accrediting practitioners to indicate levels of experience and expertise. Various national organizations have begun to certify and accredit business appraisers. However, without a single uniform standard, the field has become a jungle of ABCs which can cause confusion for clients and their professional advisers.
Today, most experts agree that there are four primary certifying organizations in the country:
Organization
Designation
Institute of Business Appraisers (IBA)
CBA - Certified Business Appraiser
American Society of Appraisers (ASA)
ASA -Accredited Senior Appraiser
American Institute of Certified Public Accountants (AICPA)
ABV - Accredited in Business Valuation
National Association of Certified Valuation Analysts (NACVA)
CVA – Certified Valuation Analyst
The Institute of Business Appraisers
Established in 1978, the Institute of Business Appraisers (IBA) was the first organization dedicated solely to business appraisers. Today, the IBA has about 3,000 members, of which about 450 are accredited as Certified Business Appraisers (CBA). There are less than a dozen CBAs in the Kansas City area.
The CBA designation is a highly regarded accreditation due to its stringent requirements. Candidates are required to complete 90 hours of appraisal education or 10,000 hours of active experience. In addition, candidates must pass a proctored six-hour exam and submit two appraisal reports for peer review. According to the IBA, approximately 46 percent of applicants pass the exam and only 28 percent pass the peer review the first time. CBAs are also required to take 24 hours of continuing education courses every two years. (source: www.go-iba.org)
The American Society of Appraisers
The American Society of Appraisers (ASA) is the oldest appraisal accreditation association, established in 1936. However, it did not recognize business valuations as a specialty until l981. Multi-disciplinarily oriented, the ASA includes real estate appraisers, antique appraisers, art appraisers and others. Today, there are approximately 1,150 Accredited Senior Appraisers (ASA) specializing in business valuations throughout the country, and only a handful in the Kansas City area.
Like the CBA, the ASA is a designation that holds a strong reputation. All candidates are required to have at least five years of full-time experience in business valuation (2,000 hours equal one year of experience). In addition, candidates are required to complete four three-day courses and pass the corresponding half-hour exam after each course. All applicants must also pass an ethics and USPAP (Uniform Standards of Professional Appraisal Practice) exam and present two appraisal reports for peer review. About 60 percent of individuals pass the peer review on the first attempt. To maintain the ASA designation, business appraisers must complete up to 100 hours of continuing education courses every five years. (source: www.appraisers.org)
The American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants (AICPA) is an organization of CPAs that branched into business valuation in 1997, as a result of the increased number of members engaging in appraisals. There are approximately 2,200 ABVs in the United States and about 20 in the Kansas City area.
ABVs are required to hold a CPA license, present at least ten business valuations engagements to demonstrate experience and pass a proctored one-day exam. However, the AICPA does not have a peer-review process, making the designation easier to obtain than the ASA or the CBA. ABV appraisers are also required to submit evidence of at least five business valuations engagements and 60 hours of continuing education courses every three years. (source: www.aicpa.org)
The National Association of Certified Valuation Analysts
The National Association of Certified Valuation Analysts (NACVA) is one of the newest associations for business appraisers. Established in 1991, NACVA has approximately 4,300 accredited Certified Valuation Analysts (CVA). There are about 30 in Kansas City.
Similar to AICPA’s ABV designation, NACVA’s CVA designation is only given to CPAs. Applicants are not required to have any prior experience, but they must pass a two-part exam. The first part is a four-hour proctored exam and the second part is a 40 to 60 hour take-home exam that incorporates a standardized case study. Of the four accreditations listed here, the CVA has the highest pass/fail ratio with approximately 75 percent of applicants passing. Like the ABV, the CVA does not have a peer-review process, making the designation easier to obtain than the ASA or CBA. To retain the CVA designation, members have the option of taking education courses, attending other NACVA programs, authoring an article, teaching a course on business valuations or submitting proof of continued experience. (source: www.nacva.com)
Conclusion
In general, the primary things to consider when evaluating a business appraiser are experience and expertise. While a lack of accreditation may not necessarily denote incompetence, accredited business appraisers show that they are willing to dedicate the time and energy to learning the latest business valuation theories and principles. Likewise, the more qualified your business appraiser appears to be, the more credible his or her conclusions and testimony are if the valuation should go to court.
