Exposure Draft Open for Comment through September 26, 2017
Published July 06, 2017
New York (July 6, 2017) — 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.
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.