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USPAP 2018-2019 Edition

© The Appraisal Foundation

56

STANDARD 9

Comment: The interest to be valued may represent all ownership rights or a subset of those rights,

such as a specific right to use the asset.

(iii) all buy-sell and option agreements, investment letter stock restrictions, restrictive corporate charter or

partnership agreement clauses, and similar features or factors that may have an influence on value;

(iv) the extent to which the interest contains elements of ownership control; and

Comment: The elements of control in a given situation may be affected by law, distribution of

ownership interests, contractual relationships, and many other factors.

(v)

the extent to which the interest is marketable and/or liquid;

Comment on (i)-(v): An appraiser must identify the attributes of the interest being appraised, including

the rights and benefits of ownership.

The information used by an appraiser to identify the property characteristics must be from sources the

appraiser reasonably believes are reliable.

(f) identify any extraordinary assumptions necessary in the assignment;

Comment: An extraordinary assumption may be used in an assignment only if:

• it is required to properly develop credible opinions and conclusions;

• the appraiser has a reasonable basis for the extraordinary assumption;

• use of the extraordinary assumption results in a credible analysis; and

• the appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

(g) identify any hypothetical conditions necessary in the assignment; and

Comment: A hypothetical condition may be used in an assignment only if:

• use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable

analysis, or for purposes of comparison;

• use of the hypothetical condition results in a credible analysis; and

• the appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions.

(h) determine the scope of work necessary to produce credible assignment results in accordance with the

SCOPE OF WORK RULE.

96

STANDARDS RULE 9-3

In developing an appraisal of an equity interest in a business enterprise with the ability to cause liquidation, an

appraiser must investigate the possibility that the business enterprise may have a higher value by liquidation of all or

part of the enterprise than by continued operation as is. If liquidation of all or part of the enterprise is the indicated

premise of value, an appraisal of any real property or personal property to be liquidated may be appropriate.

Comment: This Standards Rule requires the appraiser to recognize that continued operation of a business is

not always the best premise of value because liquidation of all or part of the enterprise may result in a higher

value. However, this typically applies only when the business equity being appraised is in a position to cause

liquidation. If liquidation of all or part of the enterprise is the appropriate premise of value, the scope of work

may include an appraisal of real property or tangible personal property. If so, competency in real property

appraisal (STANDARD 1) or tangible personal property appraisal (STANDARD 7) is required.

STANDARDS RULE 9-4

In developing an appraisal of an interest in a business enterprise or intangible asset, an appraiser must collect

and analyze all information necessary for credible assignment results.

96 See Advisory Opinion 28,

Scope of Work Decision, Performance, and Disclosure,

and Advisory Opinion 29,

An Acceptable Scope of Work

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