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Valuation vs. Calculation: When to perform which

Mary Ellen Biery
September 27, 2016
Read Time: 0 min

Accountants and valuation professionals may be asked to opine on the value of businesses for many different circumstances. It could be that a business owner asks casually about the value of his or her business as a first step to planning an exit strategy. Another situation could involve a partnership split or a high-profile divorce, such as Angelina Jolie’s recently announced split from Brad Pitt, where one or both parties have business interests that could eventually become part of related litigation.

In any situation, it’s a pretty good bet that clients will be interested in paying the lowest fee possible for a valuation, even though they may be unaware of specifically what’s involved in the different types of estimates for businesses, securities and other ownership interests. A valuation professional or accountant who can highlight the differences in valuation services of varying costs can ensure that the client receives the service that fits their needs.  The conversation had with a client can educate them on the choices while also allowing the firm to learn about the engagement and ensure that professional standards are met.

Indeed, CPAs are required to follow AICPA standards governing business valuations (the AICPA’s Statement on Standards for Valuation Services No. 1, or SSVS No. 1), which recommend clarifying in advance with the client whether a valuation or calculation engagement is being offered. SSVS No. 1 spells out what constitutes a valuation versus a calculation, and it describes when and how each is performed.

Sageworks recently produced a practice aid, “Valuation Engagement vs. Calculation Engagement,” in collaboration with Chartwell to assist valuation professionals with this issue. It outlines some of the differences between when a calculation of value is performed and when a full valuation is best.

As the practice aid explains, the valuation engagement incorporates all methods that will produce credible results, while a calculation engagement involves a limited scope of work and doesn’t incorporate all of the procedures necessary for an opinion or conclusion of value.

Valuation engagements result in an opinion or conclusion of value by the appraiser, and they are often used in preparing reports for IRS compliance, financial reporting, litigation and certain types of corporate planning. Calculation engagements, on the other hand, are often used for internal company planning, preliminary analysis or negotiations, and for services related to buy-sell agreements that specify a formula.

Use this practice aid in educating your own clients about the various valuation services your firm offers. Download it here: “Valuation Engagement vs. Calculation Engagement.”

To learn more about optimizing your business valuations and creating capacity to spend more time advising clients, watch a brief video walkthrough of Sageworks Valuation Solution. Sageworks Valuation Solution is a web-based, business valuation solution that helps firms streamline workflow, scale existing processes and increase realization rates.

Explore Sageworks’ solution for streamlining valuation workflow: Watch a one-minute walkthrough video.



About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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