Valuation Conclusion, Reporting, and Case Application
Core concepts
Conclude by reconciling the approaches: weight them by reliability given the facts-income approach for earnings-driven going concerns, market approach where good comparables exist, asset approach for asset-intensive or holding entities. Explain why weights were chosen; do not simply average. Document the value conclusion, the interest valued, the standard and premise, and the effective date.
Reports vary by standards: USPAP (Appraisal Report vs. Restricted Appraisal Report), SSVS (valuation report vs. calculation of value), and full narrative vs. summary formats. Every report should include scope, sources, assumptions and limiting conditions, the approaches used, and the appraiser's certification and signature. Workfile retention supports the report.
Traps
- Averaging approaches without rationale.
- A conclusion that does not match the stated standard, premise, or interest (e.g., a control value reported for a minority interest).
- Omitting the limiting conditions or misstating the appraiser's independence.
- Failing to reconcile the approaches or explain rejected methods.
- Report conclusions inconsistent with the engagement letter's scope.
Worked rule of thumb
Income $4,000,000 (weight 60%), market $3,600,000 (weight 30%), asset $3,000,000 (weight 10%) → $3,780,000. Then apply any level-of-value and marketability adjustments consistent with the subject interest, and state the final conclusion clearly with its effective date.
Exam strategy
Check internal consistency: standard, premise, interest, date, and adjustments must all align with the conclusion and the report type.