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Jeffrey D. Jones
Ask the Expert: Business Valuator
Jeffrey D. Jones,
ASA, CBA, FCBI
Please send your questions to
Jeffrey Jones Because of the large volume of mail and the sensitivity or specific nature of some issues, it is impossible to post answers to all of your questions in this column. As time permits, and if you so indicate, I will try to send a few personalized responses. DivorceInteractive.com has a strict
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Q:
I need
to get a business appraisal. I understand that there are several types of
appraisals that can be conducted and several types of reports that can be
utilized. What are these options?
A:
According to the Appraisal Foundation,
an umbrella organization for most of the major appraisal associations, in its
Uniform Standards of Professional Appraisal Practice (USPAP), there are two
types of appraisals that can be conducted, regardless of the appraisal
discipline.
The Complete Appraisal follows all of the
required guidelines of USPAP without invoking any departure provisions.
The Limited Appraisal entails a less rigorous
analysis and usually invokes one or more departure provisions allowed by USPAP.
This type of appraisal can be a multiple page report or as little as a letter. A
Complete Appraisal is usually required when the intended user is unfamiliar with
the business and needs to be assured that a rigorous analysis of the property
being appraised was followed. The Limited Appraisal is typically done when the
intended users do not need specified appraisal approaches or methods utilized or
a range of values will be sufficient.
There are three types of appraisal reports that
can be utilized for either the Complete Appraisal or Limited Appraisal.
a. A Self-contained Appraisal Report -
Fully describes the subject property, including its history and
background, as well as the appraisal methodology. This type of report is
utilized when the intended user is unfamiliar with the business and
needs the detail to fully understand the analysis and valuation
methodology.
b. A Summary Appraisal Report summarizes
the history, background, analysis, methodology, and conclusions of
value.
c. Restricted Appraisal Report - Provides
an overview of the subject property and methodology. This type of report
can only be utilized when the client or intended user is familiar with
subject property and does not need complete details restated in the
report. However, the appraiser should have the supporting documentation
meeting the type of appraisal being conducted, in the appraisal file.
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