A Threat to Business Valuation Practices; New Laws at the State and Federal Levels Could Prevent CPAs from Offering Some Services

By Trugman, Gary R. | Journal of Accountancy, December 1991 | Go to article overview

A Threat to Business Valuation Practices; New Laws at the State and Federal Levels Could Prevent CPAs from Offering Some Services


Trugman, Gary R., Journal of Accountancy


CPA's ability to provide services in a growing practice area may be hampered by rules and regulations in the making. The performance of business valuations--a service many firms have long offered alone or as part of a variety of engagements--could be affected by fallout from the crises at savings and loans and banks. CPA firms providing these services should be aware of legislative changes that could restrict them in the future. Whether a firm prepares business valuations for matrimonial dissolutions, employee stock ownership plans, estate tax returns or mergers and acquisitions, it could face losing this part of its practice because of new laws and regulations.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) was enacted in response to significant economic problems suffered by banks and thrifts. Many of these problems were found to be the result of questionable loans collateralized with overvalued real estate.

Title XI of FIRREA was enacted "to promote the safety and soundness of insured institutions by requiring that real estate appraisals utilized in connection with federally related transactions be performed in writing in accordance with the uniform standards by individuals whose competency has been demonstrated and whose professional conduct is subject to effective supervision." Federally related transactions are any real-estate-related financial transactions that a federal financial institution, regulatory agency or the Resolution Trust Company engages in, contracts for or regulates and that require an appraiser's services.

FIRREA requires each state to create a licensing or certification procedure for appraisers by July 1, 1991, but the deadline was extended to January 1, 1992, by the Federal Financial Institutions' Examination Counsel (FFIEC). The extension was granted because many states needed extra time to pass their own legislation and to create rules and regulations to govern this legislation.

MORE THAN REAL ESTATE

Although many smaller firms aren't involved in real estate appraisal, they and many larger CPA firms could still be affected by this legislation. There has been much controversy throughout the country over the interpretation of the federal mandate, and many inconsistencies among the states may place business valuators under the guidelines for real estate appraisers. Section 1122 of Title XI also requires the FFIEC appraisal subcommittee to study whether Title XI's provisions should be extended to personal property appraisers in connection with federal, financial and public policy interests.

Personal property is defined in the Uniform Standards of Professional Appraisal Practice, published by the Appraisal Foundation, as "identifiable, portable and tangible objects which are considered by the general public as being 'personal,' e.g., furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment." Under this definition, most business assets clearly are considered personal property and therefore are included in the new rules for appraiser certification and licensing.

On this front, there's good news and bad news for CPAs. The good news is that in March 1991, the FFIEC appraisal subcommittee report to Congress advised against requiring a regulatory framework for personal property appraisal similar to that mandated by Title XI for real estate. The bad news is that each state is still required to design and implement a certification and licensing procedure that may include business appraisers in its provisions.

Title XI guidelines define a state-certified general appraiser as someone who meets at least the Appraisal Qualifications Board's (AQB) minimum criteria to be considered a "certified general real property appraiser" and who passes a state-administered examination issued or endorsed by the AQB. The AQB criteria include 165 classroom hours in courses related to real estate appraisal matters, 2,000 hours of appraisal experience and 10 hours of continuing education each year during the period before certification renewal. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Threat to Business Valuation Practices; New Laws at the State and Federal Levels Could Prevent CPAs from Offering Some Services
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.