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In recent years, assisted by the efforts of the valuation world, the accounting world has been focused on a newly defined standard of value, "fair value" for financial reporting.  Several major trends and mega-events have pushed this process along:  the dramatic increase in the importance of intangible assets in modern business organizations, the heightened recognition of the benefits to capital markets of uniformity and transparency in financial reporting, and Sarbanes-Oxley legislation.  These trends have combined to push for more accurate and uniform recognition of the valuation of intangibles on balance sheets (that is, appropriate identification of what the intangible assets are, and appropriate estimates of their values). Responding to this push, the U.S. Financial Accounting Standards Board (FASB), and its international counterparts, have grappled with the key question of what is a reasonable and generally applicable definition for a transaction in reference to which "fair value" would be determined?  In 2006, the FASB issued a significant statement dealing with this question: SFAS 157, Fair Value Measurements.

One of the consequences of this new statement, and its increased sophistication in fair value measurement for financial reporting, is a dramatic increase in the need for collaboration between auditors and business valuation professionals.  In recent conversations with valuation professionals from accounting firms across the country, we have found that audit groups are evolving into interdisciplinary teams.  While valuation, in the past, has been a consulting service offered by regional and national accounting firms, new valuation services require professionals in these firms to now take on an additional role in support of the audit team.  This support involves reviewing the (often highly complex) valuation estimates that companies commission from third-party specialists.    That is, internal valuation experts do not produce the initial estimates of fair value for their auditors; but they do play a key role in evaluating the estimates provided by other parties.  Thus, a consequence of the FASB’s efforts to move GAAP in the direction of "fair value" will result in larger, more integrated audit teams, and also potentially higher fees.  This is just a hint of how the face of auditing will change.

The auditors’ counterparts, the valuation teams, are evolving as well.  The valuation profession, similar to other professions, is developing specialty areas.  There are valuation specialists that perform enterprise valuation for various purposes: acquisitions or mergers, tax planning and tax reporting, and litigation matters, to name a few.  Additionally, some complex areas of valuation now require very focused specialists.  For example, there are professionals focused on the valuations of intangible assets such as patents, trademarks or technology.  These specific services might be useful in different applications: for example, asset-based lending, or for documentation of charitable gifts for tax purposes.  Other valuation specialists may focus in the area of stock option valuations, and may use complex models based on the Black-Scholes options pricing formula, such as the binomial lattice models or Monte Carlo simulations.  Valuation skills may also be required in valuing embedded derivatives often found in complex corporate capital structures.

As we move into 2008, Amper is keeping pace with the quickly changing world of financial reporting and has the required professionals in place.  While we continue to offer valuation and litigation services, as we have done for years, Amper also has valuation specialists focused in the area of fair value measurement for financial reporting.  These specialists prepare (for companies not audited by Amper) intangible valuations in the context of purchase price allocation (in accordance with SFAS 141R), stock options (in accordance with SFAS 123R), embedded derivatives and other assets and liabilities requiring fair value measurement (in accordance with SFAS 157). We also review valuations of this kind when they are presented to our auditors.  At Amper, not only have the two worlds of accounting and valuation met, but they are also working together as a cohesive team on fair value measurement for financial reporting.