By Brian Casey
August 8, 2018
The American Institute of Certified Public Accountants (AICPA) just made its business valuation certification less selective, and many of the organization’s prominent ABV members have expressed disagreement with both the decision process and the result.
In the past, the Accredited in Business Valuation (ABV) credential could only be earned by those who already held a CPA license after completing valuation training, passing an 8-hour exam, and satisfying the work experience requirement. Similar to the new ABV, other business valuation credentials like the ASA and CVA do not require the same CPA background (though the CVA does lower experience requirements for CPAs). While the requirements for education, experience, and testing differ across these credentials, a review of the certifications’ standards determined that the principles of each program are largely concordant (“Global Valuation Standards…Practitioner”, Kucik and Hanson, FVLE 66). For non-CPAs, the AICPA’s decision will open the ABV as a potential alternative to the ASA and CVA.
The decision has been in the works for some time. According to the AICPA, its committees began considering the possibility of extending AICPA-offered credentials to both CPAs and other qualified professionals starting in April 2015. Over the course of 2018, various AICPA committees voted to approve the ABV proposal, including the National Accreditation Commission, the ABV Credential Committee, and the AICPA Governing Council. The current members of these groups reaffirmed support for the decision in July 2018. The AICPA’s website now reflects this new policy, outlining the requirements and rationale of the certification policy.
Eligibility for the ABV for CPAs and other finance professionals who are not CPAs requires many of the same qualifications. The designation requires the ABV exam, 75 hours of business valuation-related education and 20 hours of annual continuing education for candidates from either group. However, non-CPAs only require a bachelor’s degree rather than the 150 credit hours needed for the CPA license, though the designation also requires they take an exam on AICPA conduct and standards (CPAs take this when acquiring the CPA designation). Most notably, non-CPAs must have 1500 hours of business-valuation work experience, compared to just 150 hours for CPAs. The result, the AICPA says, will be ensuring greater consistency and quality among business valuation-accredited professionals.
Prominent CPAs, holding ABV certifications, disapprove of the change, outlining their objections in an open letter to the AICPA. Chief among their complaints are the potential consequences of lowering the selectivity of the designation. The letter argues that current ABV holders are aided greatly by their CPA knowledge, utilizing skills non-CPAs would not attain from the ABV program. The CPA requirement is what differentiates the ABV from other business valuation credentials. Furthermore, the letter claims the increased competition from other ABV holders would “[impact] the financial well-being of current and future CPA/ABVs”.
The open letter also criticizes the AICPA decision-making process for a lack of transparency and member input. Though the AICPA’s decision makers are chosen by election, the open letter charges that stakeholders, namely members of the organization, were not consulted. Opponents of the new policy also question the accuracy of the decision timeline published by the AICPA. The open letter calls for the AICPA to repeat the decision process with more transparency and consider their stakeholders’ views, especially the survey responses of of CPA/ABV holders showing 94% of respondents in opposition to the new ABV requirements.
The AICPA released a webcast admitting inaccuracies in its timeline and a lack of transparency, but maintained its decision despite the backlash. In the future, the composition of the AICPA Governing Council can change to favor overturning its decision as current council members’ terms expire. However, the majority of the Governing Council’s members have three-year term limits, making a reversal of opinion less likely in the short-term unless opposition to the decision grows. For now, the policy seems here to stay.