With the revised Practice Standards taking effect on January 1, 2026, Members will see clearer expectations for how to support and test their valuation work. The updated Practice Standard No. 120 (PS 120) emphasizes that a Valuation Conclusion must not only be carefully developed and supported but also assessed for overall reasonableness and appropriateness before it is issued. 

What’s New 

  1. Scope of Work Standards Apply to All Levels 
  • All Scope of Work requirements now apply to Comprehensive, Estimate, and Calculation conclusions. 
  • Scope of Work consists of review, inquiry, analysis, and independent corroboration of significant relevant information of the business, its industry, and any other factors relevant to the valuation and necessary to achieve a credible and properly supported Valuation Conclusion. 
  • For guidance on the depth of independent corroboration that may be appropriate at each level, review Practice Bullet No. 3 , which provides illustrative examples. 
  1. Supporting Inputs and Assumptions 
  • Significant inputs and assumptions must be reasonable, supported and appropriate for the intended use, for all valuation conclusions – Calculation, Estimate and Comprehensive. 
  • Members must use professional skepticism when considering reliance on assumptions provided by their client. 
  • If a significant input or assumption cannot be supported, it must be explicitly disclosed as a scope limitation and implications on overall credibility must be assessed. 
  1. Scope Limitations and Credibility 
  • If scope limitations are significant to a degree that they jeopardize the credibility of the conclusion, the Member must not issue a conclusion. 
  • Examples: unavailable financial statements, inability to discuss important aspects of the business with management, or unreliable key data. 
  1. Reasonableness of the Overall Conclusion 
  • Members must perform a step-back test: does the conclusion make sense in light of relevant market data, prior valuations, or other indicators of value? 
  • When multiple valuation approaches or methods produce different indications of value, the Member should compare, analyze and document how these differences were considered in reaching the final valuation conclusion. 

Why the Changes are Important 

  • Consistency across levels: Members now apply the same standards to all Valuation Conclusions, adapting depth of Scope of Work through professional judgment. 
  • Transparency: Ensuring that for every level of valuation conclusion the key inputs and assumptions are supported will also result in better report disclosure to users on key areas of the valuation. 
  • Credibility reinforced: Users must trust that conclusions are reasonable, appropriate and defensible, in the context of the data available to the Member, and that any key missing information is transparently disclosed as a scope limitation. 

Action for Members 

  • Enhance workflows: Ensure every significant input and assumption is supported and documented, with the level of independent corroboration appropriate to the engagement’s purpose and intended use. 
  • Step-back: Incorporate a reasonableness review step summarizing why the conclusion is appropriate overall. 
  • Support professional judgment: On a case-by-case basis, document considerations of when scope limitations are manageable versus when they undermine credibility. 

By explicitly setting out these requirements – already best practices in the industry – PS 120 ensures that Valuation Conclusions are consistently well-supported and developed across all levels, strengthening the public’s confidence in Members’ work. 

Further resources: 

This article highlights key elements of PS 120, but it is not a substitute for the standard itself. As Members, you are responsible for reading the new Practice Standards in full and ensuring you understand their requirements. All references to Members in this article apply equally to Registered Students of CBV Institute. 

 

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