Financial Instruments Performance Framework for the Certified Valuation of Financial Instruments Credential

Global accounting standards, as well as requirements promulgated by other standard-setting bodies such as the U.S. Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), International Valuation Standards Council (IVSC), International Auditing and Assurance Standards Board (IAASB) and Basel, increasingly call for higher quality estimates and disclosures when valuing financial instruments. Separately, there is a long-term trend toward more complexity in the terms, conditions, and structure of financial instruments themselves. This, in combination with increasing requirements with respect to a variety of measurement objectives and heightened complexity in the financial instruments themselves – leads to increasing measurement risks for reporting entities and auditors and uncertainty for third-party investors who rely on the resulting financial information.

As part of its initiative to launch the Certified in the Valuation of Financial InstrumentsTM (CVFITM) credential in 2018, the AICPA has developed a proposed Financial Instruments Performance Framework (“FIPF” or “framework”). This document provides a framework for the valuation professional, regarding performance requirements when engaged (in the case of independent third-party professionals) or assigned (in the case of internal professionals employed by a reporting entity) to provide fair value and other measurements of financial instruments. By design, the Framework does not provide instructions on how to arrive at a valuation estimate, but instead, it provides valuation professionals with guidance on the level of documentation and substantiation that is required when performing, reviewing or working with securities or financial instrument valuations.

CVFI credential holders will be required to comply with the Financial Instruments Performance Framework, strengthening confidence in the consistency and transparency of their work to improve quality in the interest of the financial markets and, ultimately, the public. Key components of this new credentialing program will include ongoing credential maintenance requirements as well as participation in a quality monitoring program delivered by the AICPA with its 40-year history of monitoring quality in the accounting profession.

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Financial Instruments Performance Framework Exposure Draft

The AICPA is seeking comments on the scope of the Financial Instrument Performance Framework and whether its contents provide the appropriate set of parameters to help improve the documentation and auditability of securities and financial instrument valuations.  

Comments on the Exposure Draft for the Financial Instruments Performance Framework will be accepted until September 17, 2018.