Standards, regulations, good practice
In our consulting practice, we strictly follow the "Code of Ethical Principles for Professional Valuers" and the "Procedural Guidelines for Fairness Opinion" by the International Valuation Standards Council (IVSC). These documents constitute the foundation of our activity, defining ethical principles and procedures, compliance with which is crucial for professional valuation and honest issuing of opinions.
FAQ - regulations, standards, good practice
Questions and problems raised by e-mail or telephone consultation
The expert works for the client, which does not mean, however, that the expert should consider every suggestion or request from the client to change his opinion. Our contracts always include the following clause: "The Contractor may refuse to introduce changes only if it would limit his independence of assessment and harm the interests of the Ordering Party. In such a case, the Contractor immediately justifies its position in writing.
Different valuation results prepared by recognized experts are nothing exceptional, especially when the subject of the valuation is unique, and the valuation is carried out in conditions of high uncertainty (start-up companies, intangible assets in the development process, etc.). Experts can correctly use different methods (derived from different methodological approaches - market, income, cost), which leads them to justify differences in the valuation results. Defending our opinion does not consist of finding weaknesses in the views of other experts but of demonstrating that our opinion is consistent with the purpose of the valuation, the standard of value was correctly established, appropriate valuation methods and financial models were selected, the parameters of which were objectified and the assumptions were reliably established by reasoned inference. Therefore, we demonstrate compliance with developing our opinion with the requirements of specific legal regulations, field standards and expert practice.
There are many valuation standards developed and published by associations and professional organizations of experts; in addition, international organizations such as the OECD generate principles of good practice in specific areas (e.g. Transfer Pricing Guidelines in transfer prices, proposed for implementation in national regulations). The expert's role is to indicate the standard and good practice to which he applies and to justify that the principles and methods he adopts are consistent with applicable legal regulations. This approach does not exclude innovative solutions. However, they must be published solutions (verified during discussions in the professional environment
In everyday speech, "risk" and "uncertainty" are often confused. Unfortunately, our reality is not deterministic and is subject to many random factors. We function in conditions of variability that characterize a complex ecosystem about which we have a level of knowledge that is difficult to determine. Uncertainty is a lack of knowledge that can be limited by obtaining information. Variability is an inherent feature of the process/system that we can restrict through stabilizing action (e.g. insuring against the effects of variability). Volatility and uncertainty are key risk factors, which we define as an event with a reliably estimable probability of occurrence that will result in specific negative consequences when it occurs. From a valuation point of view, we can consider risk expressed in quantitative terms.
Preparing a "valuation" involves applying all the requirements of standards, good practice and legal regulations. In the case of "estimation", it is possible to depart from some valuation requirements and adopt simplifications; however, in such a case, information should be included as to what extent the requirements have been deviated from and what impact this may have on the estimation result. Sometimes, in the existing information conditions of the valuation process, it is only possible to prepare an estimate, which should not be called a valuation.