Is a Calculation Valuation Report appropriate for the intended purpose of the valuation? What is a Calculation Valuation Report? Has the valuator conducted a sufficient level of work to provide the assurance required by the intended users of the valuation?
Chartered Business Valuators (CBVs) in Canada must adhere to the professional practice standards of the Canadian Institute of Chartered Business Valuators (CICBV). In this regard, there are practice standards for preparing a business valuation report (Standard 110 for Calculation, Estimate and Comprehensive Valuation Reports). There are also practice standards for preparing a report containing comments on another valuation report (Standard 410 for Limited Critique Reports).
Although not bound by the professional practice standards of the CICBV, lawyers and business owners will often be in a position to review a business valuation report prepared by a CBV. It would be prudent to involve a CBV to assist with this task. However, it is also beneficial for non-CBV lawyers and business owners to have a process for conducting a preliminary review of the valuation report. This is who this series is geared towards.
The first step to reviewing a business valuation report prepared by a CBV involves identifying the type of valuation report provided and assessing:
- The appropriateness of the type of report provided in a particular situation; and
- Whether or not the author adhered to the CICBV professional standards with respect to scope of work and report disclosure.
According to the CICBV Practice Standard No. 110, there are three types of Valuation Reports.  These reports are distinguished by the valuator’s scope of review, amount of disclosure provided and the level of assurance being provided in the conclusion, with a Comprehensive Valuation Report providing the highest assurance and a Calculation Valuation Report providing the lowest. The three types of Valuation Reports that CBV’s provide are described as follows:
Calculation Valuation Report - contains a conclusion as to the value of shares, assets or an interest in a business that is based on minimal review and analysis and little or no corroboration of relevant information, and generally set out in a brief Valuation Report.
Estimate Valuation Report - an Estimate Valuation Report contains a conclusion as to the value of shares, assets or an interest in a business that is based on limited review, analysis and corroboration of relevant information, and generally set out in a less detailed Valuation Report.
Comprehensive Valuation Report – a Comprehensive Valuation Report contains a conclusion as to the value of shares, assets or an interest in a business that is based on a comprehensive review and analysis of the business, its industry and all other relevant factors, adequately corroborated and generally set out in a detailed Valuation Report.
The context for which the valuation report is being prepared and the extent to which the users will rely on the value conclusion in making a decision or taking a course of action should be considered in determining the type of valuation report that is suitable in a particular situation. The extent to which such decisions or actions cannot be changed may influence the level of assurance that is required. 
Some relevant considerations in assessing the suitability of a particular type of valuation report include:
- Extent of reliance on conclusion by user(s);
- Significance of the matter to the user(s);
- Preliminary nature of the matter;
- Number of users of the report;
- Public availability;
- Contentious nature of the matter (or potential for being contentious); and
- Regulations or agreements.
Ultimately, a determination as to whether the type of valuation report is appropriate for the particular purpose is a matter of professional judgment that takes into account all of the relevant facts and circumstances. It is worthwhile, however, for business owners and lawyers to understand and appreciate the guidelines and standards considered by CBVs in this regard.
If you have any questions regarding the types of valuation reports that CBV can prepare or if you would like an independent business valuator to assist in your review of a business valuation report, contact us at www.vspltd.ca.