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1 THE CANADIAN INSTITUTE OF Jlflff CHARTERED BUSINESS & *3 VALUATORS March 15,2007 IIIII~!I~ I!IIIIIIIIIIIIII!~ ~~ ~ 11I1 * O - 1 i 00* D 6~ *" LEDER OF COMMENT NO. '1 LETTER OF COMMENT NO. ^ ' Sent by t directr@fasb.rg directr(5),fasb.rg - File Reference N Merritt?, 7, PO Bx 5116 Nrwalk, Cnnecticut USA Dear SirlMadam: Sir/Madam: Re: FASB Valuatin Guidance fr Financial Reprting - Invitatin t Cmment The Canadian Institute f Chartered Business Valuatrs ("CICBV") is pleased t reply t the FASB Valuatin Guidance fr Financial Reprting - Invitatin t Cmment (the "FASB ITC") and prvide yu with ur cmments. We wuld like t take this pprtunity t prvide yu with infrmatin regarding the structure and peratins f the CICBV, as well as respnding t the specific questins psed in the FASB ITC. The Canadian Institute f Chartered Business Valuatrs ("CICBV") The CICBV is natinally and internatinally recgnized as the pre-eminent business valuatin rganizatin in Canada. The CICBV was established in 1971 and develps and prmtes high prfessinal standards gverning a membership f mre than 1,100 prfessinals wh prvide business valuatin and related financial services fr cmmercial, business and financial matters, in the areas f cmpliance, disputes, financial reprting, crprate finance and cnsulting. The CICBV and its members have achieved significant recgnitin and stature as a result f having a rigrus training and certificatin prcess, Practice Standards and a Cde f Ethics. The prfessinal designatin Chartered Business Valuatr ("CBV") has becme recgnized as the premier credential fr prfessinal business valuatrs in Canada, with members prviding a brad range f business valuatin services t the Canadian and internatinal business, legal, investment banking and gvernment cmmunities. Members f the CICBV are recgnized fr their bjectivity, expertise and experience. The CBV designatin is recgnized as the nly "Valuatin Specialist" designatin by the Canadian Institute f Chartered Accuntants ("CICA"). Our members are emplyed by Canada Revenue Agency and many Prvincial Securities Regulatrs. CBVs are recgnized by the Canadian judicial system and ften appear as expert witnesses in relatin t valuatin and quantificatin f ecnmic lss matters; ur Practice Standards are als recgnized by the Curts. Further, ur members are internatinally invlved as representatives f internatinal accunting firms n glbal cmmittees and wrking with freign

2 Page 2 regulatry bdies, including the Chief Accuntant's Office f the Securities and Exchange Cmmissin ("SEC"). Since 2002 the CICBV has been addressing the evlutin f Valuatin fr Financial Reprting ("VFR") as a cnsequence ffas /142 and the Canadian equivalent CICA Handbk 1581/3062. In particular, the Bard f Directrs f the CICBV, alng with its Prfessinal Practice Cmmittee, has undertaken the fllwing: 1) Establishment f a subcmmittee t deal with VFR (the terms f reference f this subcmmittee arc are set ut in Appendix A t this letter). It shuld be nted that this subcmmittee liaises with the Canadian Accunting Standards Bard, the Canadian Institute f Chartered Accuntants and the varius Canadian Prvincial Securities Cmmissins; 2) Develpment f a new curse entitled "Valuatin fr Financial Reprting" t be delivered n an nline basis t ur members and students, as well as any ther interested parties. This curse will be cmpleted and accessible via the internet n May 1,2007; 3) Amendment f the CICBV Practice Standards in reference t VFR engagements t ensure these engagements are adequately cnsidered therein; and, 4) Develpment f an Appendix t ur Practice Standards t prvide ur members with implementatin guidance with respect t VFR engagements. Glbally, the CICBV has been active in wrking in cnjunctin with ther U.S. business valuatin rganizatins including the American Sciety f Appraisers - Business Valuatin Cmmittee (ASA-BV) and the AICPA - Business Valuatin Cmmittee (AICPA-BV). The CICBV is a member f the Internatinal Valuatins Standards Cmmittee (lvse). (IVSC). The CICBV is als a member f the Trnt Valuatin Accrd which is an rganizatin made up f Nrth American and Internatinal Prfessinal Valuatin rganizatins that wrk tgether with legislative and regulatry bdies, standard setting grups and ther prfessins t expedite the simplificatin and harmnizatin f financial reprting standards. In summary, the CICBV is the business valuatin rganizatin in Canada, recgnized internatinally. While we have a strng wrking relatinship with the Canadian Institute f Chartered Accuntants, we are an independent self-regulating rganizatin. We are recgnized as the business valuatin standard setters in Canada by the legal, business and regulatry regimes. We believe this has cntributed t ur brad market acceptance. We understand that F FASB desires a similar level f acknwledgement and acceptance fr valuatin standards in the United States. In light f this, we cnsider the CICBV mdel an effective means by which standards can be set and regulated and, as such, is ne which F FASB may want t cnsider in establishing business valuatin standards in the United States. Given ur business valuatin experience and expertise, the CICBV wuld be pleased t assist in the establishment f U.S. business valuatin standards. The freging is an verview f the CICBV. Further details can be btained at

3 Page 3 Our cmments n the specific questins included in the FASB ITC are as fllws: Need Fr Valuatin Guidance Questin 1: Is there a Need fr Valuatin Guidance Specifically fr Financial Reprting? The CICBV strngly believes that mre guidance fr Valuatin fr Financial Reprting is needed. Our nging effrts, which began in late 2005, are described abve. We cnsider that additinal guidance will lead t mre cnsistency and this will, in turn, lead t brader market acceptance. Questin l(a): Shuld Valuatin Guidance Include Cnceptual Valuatin Guidance, Detailed Implementatin, r a Cmbinatin f Bth? Generally speaking we cnsider a cnceptual valuatin guidance apprach t be mst apprpriate. Our Practice Standards are "principle-based" rather then prescriptive. Hwever, there culd als be an implementatin guide such as an Appendix, Practice Guideline r Bulletin with respect t basic appraches, minimum requirements and specific areas where there are divergent practices. Questin l(b): What Shuld Be the Duratin f Any Valuatin-Guidance-Setting Activities? The CICBV peridically reviews all f its Practice Standards, Practice Bulletins, etc. Therefre, we believe that as a matter f principle, nging reviews shuld be undertaken and there shuld be n limited duratin t standards r standard setting activities. We als appreciate that standard setting takes a significant amunt f time and effrt. Level f Participatin by Existing Appraisal Organizatins Questin 2: What Level f Participatin Shuld Existing Appraisal Organizatins Have in Establishing Valuatin Guidance fr Financial Reprting? It is ur view that Optin c), "serving as the principal standard setter" shuld be the rle f existing appraisal and business valuatin rganizatins. This wuld mst clsely represent ur current structure. Hwever, if this is nt acceptable, then Optin b), with appraisal and business valuatin rganizatins "serving as an advisr(s) s) t any standard setters" wuld be the next mst desirable level f participatin. We believe that it is essential that the standard setter speak n behalf f and reflect the pinin f as many interested parties as pssible. As such, we believe the standard setting prcess shuld include input frm appraisers, business valuatrs, academics, accuntants, auditrs and regulatrs.

4 Page 4 If Optin (b) is chsen, the CICBV wuld be interested in participating as an advisr t the standard setter. Prcess fr Issuing Valuatin Guidance Questin 3: What Prcess Shuld Be Used fr Issuing Guidance fr Financial Reprting? Optin d) "A separate permanent standard setter culd issue valuatin guidance under the versight f the F FASB and the SEC". We believe the wrd "versight" shuld be changed t "crdinatin" in rder t better describe the rle f F FASB and SEC; particularly, given ur view that the prcess shuld invlve input frm ther stakehlders. Internatinal Cnvergence Questin 4: Shuld the Prcess f Valuatin Guidance Be n an Internatinal r Natinal Level? The prcess f setting standards and valuatin guidance shuld be undertaken n an internatinal level, with n gegraphic bundaries. The CICBV's VFR subcmmittee membership cnsists partly frepresentatives frm internatinal firms and they have cntributed significantly t ur wrk in this area - including the develpment f ur new curse. In additin, given the general mvement t develpment f harmnized internatinal standards and regulatins, this wuld be a gd pprtunity t advance valuatin standards in this directin. We appreciate that this may result in the develpment f nly "minimum" standards in ther cuntries. Other Ptential Issues (a) Wh shuld grant authrity t issue the valuatin guidance? In rder t establish the necessary credibility and acceptance in the brad marketplace, F FASB shuld endrse whatever rganizatin issues the valuatin guidance. (b) What due prcess prcedures shuld the standard setter fllw in issuing valuatin guidance? There shuld be transparency in the standard setting prcess (expsure drafts, public discussins). All stakehlders, including reprting issuers, academics, accuntants, regulatrs, auditrs, etc. shuld be invlved. In this regard we nte that CICBV By-Laws state: 'The "The Bard f Directrs shall publish prpsed practice standards and recmmendatins in Expsure Drafts which shall include a statement f the scpe and intentin f the prpsed practice standards and recmmendatins and shall set a date by which the members shall prvide cmments, if

5 Page 5 any. The Bard f Directrs shall be entitled t circulate as many revisins t Expsure Drafts as it shall cnsider apprpriate in rder t btain all relevant cmments f the members. " "Practice Standards and Recmmendatins shall be effective n the (he date that they are apprved by the members, which shall nt ccur until such Practice Standards and Recmmendatins have been circulated amng members fr cmment and such Practice Standards and Recmmendatins have been apprved by nt less than tw-thirds f the members f the Bard f Directrs. " (c) Hw shuld any ther rganizatin that issues valuatin guidance be funded? Funding can be prvided frm the reprting issuers, vluntary cntributins frm accunting and valuatins firms, capital markets and ther stakehlders. The general principle shuld be that funding shuld be equitable t the parties wh are beneficiaries f the standard setting prcess, including preparers and users f valuatins. The CICBV is funded by member and students dues and prceeds frm educatinal curses, seminars and materials. These dues fund the standard setting prcess alng with the ther peratins f the CICBV. We als rely heavily n ur member vlunteers t assist in the prcess f standard setting. Rundtable We wuld like t be cnsidered fr inclusin at the upcming public rundtable meetings. Cnclusin We hpe that this submissin is insightful and helpful t yu. We cnsider Practice Standards t be fundamental t ensuring the adequacy and standardizatin f valuatin practices and cmmunicatins, bth f which are necessary fr brad market acceptance. As nted, the CICBV mdel, being a separate valuatin standard-setting bdy affiliated with an accunting bdy and having input and membership representing different disciplines has prven t wrk very well. Our 36 years f experience as an rganizatin has allwed us t understand the imprtance f Practice Standards and the prcess f standard setting, We think ur structure and mdel shuld be given serius cnsideratin fr implementatin by F FASB. If an advisry rle exists fr the CICBV within the chsen U.S. standard setting prcess, we wuld be pleased t cnsider invlvement therein. If yu have any questins regarding the abve cmments, r if we can assist yu further in this prcess, please d nt hesitate t cntact the undersigned (direct phne number (519) ). Yurs truly, Carl Mertn, CA, CBV Chair,, Prfessinal Practice Cmmittee

6 APPENDIX A THE CANADIAN INSTITUTE OF CHARTERED BUSINESS VALUATORS FINANCIAL REPORTING SUB-COMMITTEE Terms f Reference 1. T examine whether the Institute needs t develp new r amend existing standards, practice bulletins, guidelines r appendices t assist CBVs wh are invlved in valuatins fr financial reprting ("VFR") and t infrm all Members and the public n the generally accepted business valuatin principles t prtect the prfessin and the public. 2. T discuss and recmmend what needs t be dne t educate the fllwing grups: Members Students Prfessinal Accuntants and Auditrs Management Securities Cmmissins The Business Cmmunity The general public 3. T identify internatinal issues and advise the Bard in respect t the impact n the business valuatin prfessin and recmmend future actins. Timeline A preliminary reprt will be presented t the Bard at the June 22, 2006 meeting. Structure Cnsists f ne Bard Member wh is als the Chair, Farley Chen, and five appinted nn-bard Members, alng with the CICBV Prfessinal Practice Crdinatr and the President & CEO. December 2, Wellingtn Street West, Trnt, Ontari, Canada M5V 3H2 Tel' let: Fax: