We are frequently asked the question: what are the types of Valuation Reports? Here is a summary of each and what these Valuation Reports entail.
According to the Canadian Institute of Chartered Business Valuators (CICBV), a business valuation report is “any written communication containing a conclusion as to the value of shares, assets or an interest in a business, prepared by a valuator acting independently.” There are 3 types of independent valuation reports under Practice Standard No. 110 of the CICBV. These differ on the depth of analysis undertaken and the time taken to complete them.
Calculation Valuation Report
Contains a conclusion as to the value of shares, assets or an interest in a business.
Based on minimal review and analysis and little or no corroboration of relevant information.
Generally set out in a brief Valuation Report.
This type of report provides the least amount of assurance with respect to the value conclusion.
Estimate Valuation Report
Contains a conclusion as to the value of shares, assets or an interest in a business.
Based on limited review, analysis and corroboration of relevant information;
Generally set out in a Valuation Report that is less detailed than the Comprehensive Valuation Report.
This report provides a lower level of assurance with respect to the value conclusion.
The time taken to complete this type of report is higher than a Calaculation Valuation Report.
Comprehensive Valuation Report
Contains a conclusion as to the value of shares, assets or an interest in a business.
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 report.
This report provides the highest level of assurance with respect to the value conclusion.
The time taken to complete this type of report is higher than both a Calaculation Valuation Report and an Estimate Valuation Report.
No Two Valuation Reports Are the Same
Just as no two businesses are alike, no two valuations are alike either. Valuation Reports, depend on the business, the industry and the valuator themselves, the tools and the different methods used to conduct the valuation.
The outcome of a business valuation report rests on the reasonableness of various underlying assumptions made by the valuator. Thus, the soundness and accuracy of the overall report will rely heavily on the judgment used in making and supporting these underlying assumptions. Differences in judgment can drastically sway the valuation conclusion. It shouldn’t be surprising if there is a major difference in two valuation reports conducted by two separate valuators, even if both these reports are valuing the same business at the same date.
Limited Critique Reports
Limited Critique Reports arise from an engagement where a Valuator is retained to provide comments on another report. The provision of conclusions in a Limited Critique Report is not permitted by Practice Standard No. 410. A Limited Critique Report is defined as
"any written communication containing comments on a report that was prepared by a Member or non-Member containing a conclusion as to the value of shares, assets or an interest in a business, or a conclusion as to the quantum of financial gain/loss, or any conclusion of a financial nature in the context of litigation or a dispute (the “Original Report”), prepared by a Valuator (the “Reviewer”) that does not itself contain a valuation conclusion or conclusion as to the quantum of financial gain/loss, or any conclusion of financial nature in the context of litigation or dispute.”
Investment Entity Review Reports
Practice Standard 610 defines Investment Entity Review Reports as
"any written communication prepared by a Valuator (the “Reviewer”) containing a conclusion as to the reasonableness of the value of the specified shares, units, underlying investments or the net asset value of an Investment Entity as determined by a manager of the Investment Entity or another party (the “Preparer”).
Expert Reports
Practice Standard 310 defines Expert Reports as
"any written communication other than a Valuation Report, containing a conclusion as to the quantum of financial gain/loss, or any conclusion of a financial nature in the context of litigation or a dispute, prepared by an Expert acting independently.”
Advisory Reports
Practice Standard 210 defines Advisory Reports as:
“any written communication containing (a) a conclusion as to the value of shares, assets, an interest in a business or a conclusion as to the quantum of financial gain/loss or any conclusion of a financial nature in the context of litigation or a dispute, or (b) comments on a report containing a conclusion on such matters, prepared by a Valuator/Expert who has not been engaged to act independently.”
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