RICS Global Director of Business Valuation Steve Choi tells us more about the Certified in Entity and Intangible Valuations (CEIV) credential, which aims to instil confidence in the practice of determining fair value in financial reporting.

Surgeons are expected to perform procedures of the highest quality when they operate on their patients. They are, after all, dealing in matters of life and death. Practitioners are held to a very high standard of care and an individual faces severe consequences for malpractice. Such great expectations correlate to the high esteem in which the public holds those individuals who practise medicine.

By developing an infrastructure and placing quality as its primary objective, the valuation profession has, like the healthcare sector, an opportunity to set a path for the future of the industry. The credential, known as the Certified in Entity and Intangible Valuations (CEIV), aims to guide valuation professionals on this journey.

Find out more about our CEIV credential

Of great importance

Over the past decade, greater importance has been placed on the use of fair value estimates as the basis for measuring items in financial statements. Estimating these fair value measurements frequently involves the use of complex financial models, several valuation approaches and analytical assumptions, as well as professional judgement. However, auditors and regulators have sometimes found it difficult to comprehend how key assumptions and conclusions were determined.

As the use of fair value as a measurement basis for financial reporting has expanded, the overall quality of the valuation work prepared by individuals has come under increased scrutiny from the US Securities and Exchange Commission (SEC). About five years ago, the SEC confronted the valuation profession to address the need for improved fair value measurements in financial statement reporting. The commission questioned whether individuals conducting fair value measurement estimates have the requisite training, qualifications, experience and expertise to perform this type of work.

This criticism was a wake-up call to the profession and underscored the obligation for professionals to protect the public interest by providing consistent, supportable and auditable fair value measurements.

The credential

In response, we collaborated with representatives from the American Institute of Certified Public Accountants, the American Society of Appraisers, the Appraisal Foundation, the International Valuation Standards Council and several international public accounting firms to develop the shared CEIV credential for the business valuation profession. The CEIV credential helps unify valuation professionals under a set of guidelines called the Mandatory Performance Framework, which is designed to reduce expectation gaps between the valuation professional and regulators, auditors and company management.

Professionals seeking the CEIV credential must meet rigorous eligibility requirements, which include demonstrating competencies in the valuation of entities and intangible assets, and fair value measurement, through training and passing a two-part CEIV certification exam. Credential-holders are required to submit to an annual, proactive engagement-level quality monitoring programme. The programme’s goal is to ensure that high-quality valuations are performed in accordance with the new performance framework.

There are many highly qualified valuation professionals who adhere to best practices and consistently produce high-quality valuation work. The CEIV credential helps inspire confidence in the quality and consistency of the valuation work performed, improve market confidence, and bring a higher level of professionalism and accountability to those committed to enhancing audit quality, consistency and transparency in fair value measurements for financial reporting purposes.

This is an edited extract from RICS Modus Global Edition, June 2017

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