With hopes of bringing more standardization and consistency to valuations, the International Valuation Standards Council has published a slate of new International Valuation Standards covering a wide range of assets.

The IVSC spent three years developing the standards in response to the 2008 financial crisis to establish a more consistent, transparent process for performing valuations. The new standards can be applied to the valuation of financial instruments, real property, intangibles, and business interests. IVSC said regulators and the Group of Twenty nations have pointed to valuation as an area where improvement could promote financial stability.

In the United States, valuation professionals follow a combination of accounting standards that are binding on public companies regulated by the Securities and Exchange Commission as well as professional standards that can vary among professional organizations. The Financial Accounting Standards Board put into effect Financial Accounting Standard No. 157 Fair Value Measurement (now found in Accounting Standards Codification Topic 820) in 2007 to govern how fair value should be measured for purposes of completing financial statements. Valuation professionals also can be certified by any number of professional groups, each of which writes its own rules for how valuations should be performed.

Steven Sherman, chairman of the IVSC's standards board and a partner with KPMG, says the new IVSs contain globally accepted concepts and principles that investors can rely on to deliver more consistent valuation results. “One of the frustrations when you talk with auditors and investors is that across the entire appraisal process there's a lot of inconsistency and diversity,” he says. “If valuation professionals follow these standards, it will bring more consistency to the profession.”

While accounting standards may provide some guidance on how to measure fair value under U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards, the new IVSs provide more detailed standards for valuation professionals, says Sherman. And they can apply not only to financial reporting, but also to tax, litigation support, and dispute resolutions. Regulators around the globe could promote greater consistency in valuations by requiring application of the IVSs where they require valuations to be performed, according to Sherman.