Appraisals.. To Be Or Not To Be?

When getting an appraisal for a practice it’s important to understand what you get.  Professional organizations such as NACVA (National Association of Certified Valuation analysts), AICPA (American Institute of CPA’s) and other credentialed association have specific standards and methods for appraisals.  An appraisal can easily provide the wrong value yet still produce a seemingly correct figure. Why?  Because incorrect methods, assumptions or references can dramatically change the value.

 There are several types of appraisals commonly used and usually are broken down into either an income approach, market approach or an asset approach.   You really can’t combine them to get a value. For example you can’t combine goodwill, book value assets and inventory to derive a value.

Unfortunately, some reports are not based on recognized standards and do not use the standard appraisal methods to determine value. The result may be close — simply by luck.   Standards dictate that all assertions should be footnoted or referenced as to their source.  Some reports use calculations and assumptions without providing any footnote or backup as to the source.  Our simple rely on the appraiser’s experience.  Referenced sources should be from third parties and not just the opinion of the appraiser themselves. When you looking for an appraisal ask if they are members of an appraisal association or hold a CVA. To learn more about appraisals contact us for an extensive article.

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