Fair Values Rules 3.docx

It also builds communication between those performing the valuation and those reviewing it. Participants in the kick-off meeting should include management personnel, any external valuation advisors, representatives from the company's audit team and their internal valuation specialists. Unfortunately, the cost of skipping this initial meeting can be high--including incomplete scoping, inadequate documentation, disagreement on technical issues, inconsistency with other fair value analyses and additional time, documentation and expense. Following the kick-off meeting, focus should shift to performing the actual valuation analysis, taking into account the following: * The valuation should not only conform to the established principles of valuation, but also to guidance contained within the relevant accounting literature. * Inputs and assumptions should be documented and well-supported. * The valuation analyst should remember that both market conditions and accounting standards are dynamic. As a result, some approaches and assumptions that may have been appropriate in prior periods may not be appropriate now. In addition, an experienced valuation analyst should also anticipate questions by the audit team's internal valuation specialist, preparing supplemental sensitivity calculations and adequate support as necessary. It is important to note that regardless of whether the valuation is being performed internally or not, management must take full responsibility for the work performed--understanding how the valuation is conducted, including the development and consideration of key inputs and assumptions. In cases where a financial forecast is used, management should also ensure that the forecast will withstand scrutiny and that sensitivities to forecast changes are understood. Identifying and Understanding Critical Elements of Fair Value Estimations In an ideal situation, all components of the draft estimate have effectively been reviewed by management and the audit team at intervals throughout the process. However, at a minimum, management must review the draft estimate in its entirety once it has been completed.