AICPA Comments on The Appraisal Foundation’s Exposure Draft

March 31, 2014

The American Institute of CPAs’ (AICPA) Forensic and Valuation Services Executive Committee submitted a comment letter on February 28 to The Appraisal Foundation on the second exposure draft of Valuation of Customer Related Assets.

The exposure draft offers guidance for those who are preparing fair value measurements of customer-related assets.

The AICPA’s letter included, among others, the following recommendations:

  • That the term “customer contracts and related customer relationships” in the exposure draft instead be termed “customer contracts and expected contract renewals” inasmuch as the distinction is important because the values are different.
  • That specific examples of market participant assumptions should be explained in the exposure draft.
  • That all factors pertinent to a market participant should be factored into the valuation of a customer-related intangible asset.
  • That five considerations be included in the determination of when the cost approach is appropriate;
  1. The analyst does not have sufficient data to perform the market approach.
  2. The analyst does not have sufficient data to perform the income approach.
  3. The analyst has reliable replacement cost new data.
  4. The analyst has reliable obsolescence data.
  5. The analyst has remaining useful life data.
  • That the deferred revenue liability section of the exposure draft should be expanded and a specific example provided.