AICPA Seeking Comment on Framework for Valuation of Financial Instruments

Exposure Draft Open for Comment through September 26, 2017

NEW YORK--()--The American Institute of CPAs is seeking comments on a new Framework to guide CPAs and financial professionals on the valuation of financial instruments and their underlying components. The Framework will bring clarity, consistency and transparency to the valuation of these instruments. Historically, financial instruments, such as mortgage-backed securities, credit default swaps, complex bonds and other derivatives, have been difficult to value, which has the potential to adversely impact markets and the global economy.

“This Framework will ensure that professionals working with financial instruments perform their engagements with independence, objectivity and consistency. We encourage all stakeholders to review and comment on the draft.”

The new Framework defines the level of documentation necessary for a professional working with securities and financial instruments to effectively demonstrate the valuation performed. The guidance provided by the Framework relies upon three major principals: independence, objectivity and consistency. This guidance will inform the basis for a new credential from the American Institute of CPAs, Certified in Valuation of Financial Instruments (CVFI), expected to launch later this year.

The Disclosure Framework for the Valuation of Financial Instruments and the Certified in Valuation of Financial Instruments (“CVFI”) Credential, provides guidance on how to explain the characteristics of financial instruments and disclose how these securities have been valued in a way that is understandable, consistent and transparent. The Framework establishes parameters of documentation requirements, sets definitions of terms that may be unique to the Framework, and includes a list of accounting, audit and valuation standards and references to technical literature directly applicable to the guidance in the Framework.

The comment period for this Framework is open through September 27, 2017. Comments within this time period will be reviewed and applied to the disclosure framework by the AICPA Disclosure Framework Work stream and the AICPA Financial Instruments Task Force, both of which are comprised of financial professionals, academics, and financial policy experts.

“Financial instruments have become increasingly complex and determining their value has been a challenge that has adversely affected the market in the past. With this Framework, the AICPA is responding to marketplace needs by creating a standardized and replicable process for financial professionals who perform valuations on financial instruments,” said Jeannette Koger, CPA, CGMA vice president of advisory services and credentialing, AICPA. “This Framework will ensure that professionals working with financial instruments perform their engagements with independence, objectivity and consistency. We encourage all stakeholders to review and comment on the draft.”

The Application of the Disclosure Framework for the Valuation of Financial Instruments demonstrates how the Framework would be applied for areas of valuation that are often either misapplied or insufficiently supported or documented in valuations for financial reporting. It also identifies the most common components in which the valuation professional provides a conclusion of value, and addresses matters where there is need for greater consistency in the application of the approaches and methodology. It provides support for matters that require the application of professional judgment, as well as documentation of inputs and results.

The Application of the Financial Instruments Framework will continue to evolve and expand to cover a broader spectrum of subject matter topics and professional practice trends in the valuation profession.

Once finalized, CVFI credential holders will be required to comply with the Framework, ensuring confidence in the consistency in their work, to ensure integrity and transparency in the fulfillment of their duties, in the interest of the financial markets and ultimately to the public.

CPAs and valuation professionals are encouraged to sign up for information and updates on the Certified in Valuation of Financial Instruments (CVFI) credential from the AICPA.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.

Media representatives are invited to visit the AICPA Press Center at www.aicpa.org/press.

About the Association of International Certified Professional Accountants

The Association of International Certified Professional Accountants (the Association) combines the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 650,000 members and students in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.

Contacts

American Institute of CPAs (AICPA)
James Schiavone, 212-596-6119
james.schiavone@aicpa-cima.com

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Release Summary

AICPA is seeking comments on a new Framework to guide CPAs and financial professionals on the valuation of financial instruments.

American Institute of CPAs (AICPA)