Business Appraisal - Types of Value


Types of Valuation Engagements

The AICPA Statement on Standards for Valuation Services (SSVS-1)defined terms that you should be aware of when looking for appraisal estimates and communicating with business valuation professionals.

Engagement To Estimate Value

Refers to an engagement or any part of an engagement

(for example, a tax, litigation, or acquisition-related engagement)

that involves estimating the value of a subject interest.

Fair Value

For financial reporting purposes only, the price that would be

received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement


Fair Market Value

The price, expressed in terms of cash equivalents,

at which property would change hands between a hypothetical

willing and able buyer and a hypothetical willing and able seller, acting

at arms length in an open and unrestricted market, when neither

is under compulsion to buy or sell and when both have reasonable

knowledge of the relevant facts.

Going Concern Value

The value of a business enterprise that is expected to continue to operate into the future. The intangible elements of Going Concern Value result from factors such as having a trained work force, an operational plant, and the necessary licenses,

systems, and procedures in place.

Liquidation Value

The net amount that would be realized if the business is terminated and the assets are sold piecemeal. Liquidation can be either “orderly” or “forced.”

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