In All Fairness (Notes and Issues; Financial Reporting Valuation‪)‬

Valuation for financial reporting (VFR), or "mark-to-market," is an issue appraisers have been hearing about during the last few years. Although initially portrayed as a potential "silver bullet" for appraisers--perhaps as lucrative as FIRREA (1)--the reality is turning out to be a bit more modest, but no less noteworthy. One factor driving mark-to-market is the concern for transparency and accuracy of financial statements in the wake of financial reporting scandals. Following the Enron and WorldCom debacles, the U.S. Congress passed the Sarbanes-Oxley Act of 2002 (the Act) "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes." (2) Valuing property at actual market value, as opposed to at historic cost, is just one of the steps that could help make financial reports more relevant and reliable. The Act created the Public Company Accounting Oversight Board (PCAOB). The PCAOB is starting the process of setting new audit and attestation standards (standards previously set by the American Institute of Certified Public Accountants), and there is little doubt that fair value will play a role. Moreover, the Act itself prohibits accountants from providing valuation services for their audit clients in order to correct what seems an obvious conflict of interest. This prohibition already creates opportunities for valuation professionals and the development of standards incorporating fair value could open the door even wider. But these changes are only part of the picture, and the opportunity for appraiser involvement does not stop there.