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Opinion of Value vs. Calculation of Value

Do I need an Opinion of Value or a Calculation of Value? The Answer – It Depends.

Opinion of Value
A valuation analysis and report that results in an expert Opinion of Value, is governed by the professional and reporting standards of the American Institute of Certified Public Accountants and the National Association of Certified Valuation Analysts. While each of these professional organization’s standards differ in some regards, there is consensus on the level and extent of research and analysis that must be done in for a professional to render an Opinion of Value.

As a result of these rigorous requirements, reports that meet these standards are accepted by the IRS and most courts as appropriate for consideration as evidence supporting positions taken by taxpayers and litigants. The valuation analyst is free to apply valuation approaches and methods he/she deems appropriate in the circumstances.

An Opinion of Value is required for the following types of matters:

  • Estate and Gift Valuations
  • Other IRS related matters
  • ESOPs
  • Litigation and Divorce matters

Calculation of Value
A Calculation of Value (COV) can be seen as a quick down and dirty, quick estimate of what the value might be for an enterprise. COVs are NOT a full professional opinion of value but rather the result of certain calculations that are agreed upon relative to the scope of the work effort.

In performing a COV the scope is significantly reduced and the level of judgment is greatly diminished. As requested, the valuation analyst may perform additional procedures in the performance of a COV engagement.

A Calculation of Value may be appropriate in the following circumstances:

  • Settlement Purposes
  • Mediation Purposes
  • To support negotiation for an acquisition or sale of a business
  • Client desires to limit fees, scope and procedures compared to a full valuation engagement