The ABC's Of Business Valuation Designations
ASA, CFA, CBA, ABV, CVA …
Welcome to the jungle of business valuation designations. These designations are all very different and have varying degrees of requirements, years of experience, difficulty of exams, and amount of required continuing education. Due to these vast differences, it is important to understand the distinctions between them.
In the field of business valuation there are no licensing requirements or specific college degrees. As such, over the past 30 years, the industry has gradually realized the necessity of accrediting practitioners to indicate levels of experience and expertise. Various national organizations have begun to certify and accredit business appraisers. Today, most experts agree that there are four primary certifying organizations in the country:
- American Society of Appraisers (ASA): Accredited Senior Appraiser (ASA)
- CFA Institute (CFAI): Chartered Financial Analyst (CFA)
- Institute of Business Appraisers (IBA): Certified Business Appraiser (CBA)
- American Institute of Certified Public Accountants (AICPA): Accredited In Business Valuation (ABV)
- National Association of Certified Valuation Analysts (NACVA): Certified Valuation Analyst (CVA)
The American Society of Appraisers (ASA)
The American Society of Appraisers (ASA) is the oldest appraisal accreditation association, established in 1936. The ASA is a multidisciplinary organization comprised of real estate appraisers, antique appraisers, art appraisers, business valuation appraisers, and others. Today, there are approximately 1,170 Accredited Senior Appraisers (ASAs) specializing in business valuations throughout the country, and only about 13 in the Kansas City area.
Like the CBA, the ASA is a designation that enjoys a strong reputation. All candidates are required to have at least five years of full-time experience in business valuation. In addition, candidates are required to complete ASA’s four-level course series and pass the corresponding written and oral exams. All applicants must also interview with their local chapter, pass an ethics and USPAP (Uniform Standards of Professional Appraisal Practice) exam and present two appraisal reports for peer review. About 60 percent of individuals pass the peer review on the first attempt. To maintain the ASA designation, business appraisers must complete continuing education courses as part of a mandatory reaccreditation process. (Source: Terry Allen, ASA)
The CFA Institute (CFAI)
CFA Institute is a global association of investment professionals that traces its lineage back to the establishment of the Financial Analysts Federation (FAF) in 1947. Leadership of the FAF established an independent organization – the Institute of Chartered Financial Analysts (ICFA) – to administer the CFA credentialing program in 1959; and the ICFA administered the first CFA exams in 1963. Later the FAF and the ICFA merged to become the Association for Investment Management and Research (AIMR). In 2004, AIMR changed its name to CFA Institute.
The CFA Institute has more than 116,000 members in 137 countries, with 91% of members being CFA charterholders. Obtaining the CFA charter requires passing of three six-hour exams offered annually (except for the first exam which is offered semi-annually). The average pass rates for the three CFA exams are as follows: first exam (level 1) – 42%, second exam (level2) – 46%, third exam (level 3) – 59%. The low pass rates among the individual exams, and the overall low completion rate of the CFA charter has contributed to its growing reputation and prestige. Other than annual ethics certifications, the CFA charter does not require continuing education. (Source: CFA Institute website)
The Institute of Business Appraisers (IBA)
Established in 1978, the Institute of Business Appraisers (IBA) was the first organization dedicated solely to business appraisers. Today, the IBA has about 1,750 members, of which about 400 are accredited as a Certified Business Appraiser (CBA). There are fewer than a dozen CBAs in the Kansas City area.
The CBA designation is a highly regarded accreditation due to its stringent requirements. Candidates are required to complete 90 hours of appraisal education or have 10,000 hours of active experience. In addition, candidates must pass a proctored six-hour written exam and submit two appraisal reports for peer review. According to the IBA, approximately 75 percent of applicants pass the exam and one-third of submitted demonstration reports are accepted without change. CBAs are also required to take 24 hours of continuing education courses every two years. (Source: Howard A. Lewis, IBA)
The American Institute of Certified Public Accountants (AICPA)
The AICPA is an organization of CPAs that branched into business valuation in 1997 because of the increased number of members engaging in appraisals. There are approximately 2,780 ABVs national wide and about 20 in the Kansas City area. ABVs are required to hold a CPA license, present at least six business valuation engagements or 150 hours of substantial valuation experience and pass a proctored one-day exam. (Source: Eddie Parker, AICPA)
The National Association of Certified Valuation Analysts (NACVA)
NACVA is one of the newest associations for business appraisers. Established in 1991, NACVA has approximately 5,000 accredited Certified Valuation Analysts (CVAs). There are about 30 in the Kansas City area. The CVA designation is given only to CPAs. Applicants are not required to have any prior experience, but they must pass a two-part exam. The first part is a five-hour proctored exam and the second part is a 40-60 hour take home exam that involves completing a business valuation report. Of the four accreditations listed here, the CVA has the highest pass/fail ratio, with approximately 96 percent passing the proctored exam and 86 percent passing the case study. To retain the CVA designation, members must take continuing education courses, author an article, teach a business valuation course, or submit proof of continued experience. (Source: Mary Thompson, NACVA)
This document is for informational use only and may be outdated and/or no longer applicable. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Mariner Capital Advisors does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.