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Southern California Chapter of the Appraisal Institute "Valuation for Financial Reporting" Seminar

On May 25, 2011, the Southern California Chapter of the Appraisal Institute welcomed WTAS’ R.J. Starr as a guest panel speaker. Before a crowd of 100+ valuation professionals, Starr spoke on a panel that included members from WTAS, BDO, Deloitte, KPMG and PWC related to the reporting requirements for financial reporting valuation.

In their 90-minute panel discussion, participants discussed the need and requirements for financial reporting valuation analyses, the qualifications and experience required to perform financial reporting analyses, and the overall valuation process.

The discussion kicked off by identifying Generally Accepted Accounting Principles (GAAP) compliance projects that may require real estate valuation components, including mergers/acquisitions, impairment analyses and part of larger business-related activities. The discussion progressed towards the convergence of U.S.-based GAAP compliance as set by the Financial Accounting Standards Board (FASB) and international financial reporting compliance with International Financial Reporting Standards (IFRS) as dictated by the International Accounting Standards Board (IASB). All panel members agreed that convergence with IFRS is inevitable but the timing is still unknown. Questions from the audience led to a discussion about the applicable financial reporting standards, and the moderator also focused on the importance of relevant Statements of Accounting Standards (SAS) issued by the Accounting Standards Board.

The panel discussion concluded with the importance and role of audit reviews as well as best practices for the valuation industry. Many of the appraisers in attendance were concerned with their clients’ auditors questioning the assumptions and value conclusions for reports intended for various purposes; however, the panel concluded that audit review was a necessity in the contemporary financial environment. Many of the panel members from audit firms who conduct valuation reviews outlined the level of scrutiny the auditors are under with respect to public companies. The increased pressure is not just from the Securities and Exchange Commission (SEC) but also the Public Company Accounting Oversight Board (PCAOB) over the past two to three years. The topic turned towards best practices in the real estate valuation industry, including methodologies and work product. The panel ultimately concluded that a summary narrative report was the optimal work product for financial reporting purposes.

Those in attendance applauded the proactive nature of the conference and panel (to the eminent IFRS convergence) as excellent knowledge exchange and education. Several in the audience noted that it is seldom that they engage in valuation at this level but appreciated the knowledge nonetheless. In the end, Starr’s contribution to the Appraisal Institute’s spirit of mutual professional aid was successful by sharing how valuation professionals can work together in an effort to serve clientele. Please see www.sccai.org for more details.