There are three levels of quality in the preparation of valuation reports. The intended use of the report is a determining factor in selecting which quality level is required.
This 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.
Often uses Audited or Review financial statements, and full real estate appraisal reports.
Preparation of the document requires a significant degree of professional care in order for it to withstand legal scrutiny and also meet regulatory standards.
End use: Generally used for court purposes where the information provided becomes evidence, and is therefore subject to scrutiny and criticism from opposing counsel. Also used where parties relying on the report lack requisite knowledge about the business, or in instances where the report is to be filed pursuant to regulations.
This 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.
Generally, estimate valuation reports are used in situations where the degree of assurance required in the report is less critical than is necessary in a Comprehensive Valuation Report. An estimate report is used in cases where the user of the report is comfortable with certain assumptions used due to personal knowledge about the business.
Often uses Review or Notice to Reader financial statements plus additional procedures and summary real estate appraisal reports.
End use: Report contents are frequently used as a means to substantiate information being presented to third parties, such as the Canada Revenue Agency. Applications for the report include: estate/succession planning purposes; pre-trial and trial proceedings; analysis of acquisitions; life insurance purposes; shareholder buy/sell agreements; and income tax elections.
Calculation Reports contain 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
This type of report is suitable when only ‘rough, ballpark’ conclusions are needed.
Often uses Notice to Reader financial statements. This being the case, only limited assurance can be given as to the accuracy of the conclusion.
End use: Often selected for planning purposes, internal management use, or out-of-court settlement purposes in instances where the business assets’ value is not significant to the overall financial picture. Uninformed third parties should be careful to not place undue reliance on this report’s conclusion.
Limited Critique Report
In addition to the three quality level reports listed above, Horsley & Associates can prepare Limited Critique reports
Limited Critique reports provide comments on another report that contains 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, but where a valuation conclusion is not provided by
Any report or letter that contains a valuation conclusion cannot be classified as a Limited Critique and must conform to the CICBV Professional Standards relating to one of the three quality level reports listed above.
The Valuation Critique can be either limited to specific issues or take the form of an overall opinion as to whether the report being critiqued is in fact reasonable, and if not, the likely range of possible monetary error.
End use: It is often useful for a lawyer to have a critique report by an independent expert to justify his or her reliance on a valuation report prepared by the opposing side. It is also of benefit to lawyers who want an independent expert to scrutinize a valuation report, which they themselves have commissioned.