June 14, 2005

Ms. Janice Fredericks
Financial Planning Project Manager     
AICPA
Harborside Financial Center
201 Plaza Three
Jersey City, NJ  07311-3881

Dear Ms. Fredericks:

I am writing on behalf of the California Society of Certified Public Accountants Committee on Taxation to submit comments to the exposure draft of the Proposed Statement on Standards for Valuation Services (herein referred to as “SSVS”), which was issued on March 30, 2005.  Our committee has grave concerns regarding the SSVS.

The SSVS will severely limit a practitioner’s ability to provide timely, cost effective, professional services to clients.  Further, the SSVS do not adequately provide for the practical consequences of assisting clients with the determination of values in situations where those values are either for internal use only or will receive substantial review by government agencies, the Internal Revenue Service or other taxing authorities, and, therefore, SSVS is too limited in its jurisdictional exceptions. 

Appendix A, Questions and Answers, of the SSVS provides illustrations of the proposed rules.  With regard to specific questions, we note the following as examples of rules that are of concern:

• Question 7:  When applying Statement 24 of the SSVS to tax consultation engagements, a practitioner is placed in the precarious position of providing specific clarity to clients that amounts discussed, including hypothetical discounts or premiums, are, in fact, estimates and are not actual values.  In our opinion, the SSVS imposes an unreasonable burden on the practitioner to comply with the standard.
• Question 8:  A jurisdictional exception should apply when a value in a tax return is subject to review by a taxing authority.
• Question 10:  The jurisdictional exception provided in this question is too restrictive.  For example, both the Internal Revenue Service and the courts have recognized that the application of discounts to fractional interests to the value of property and business entities is both appropriate and required.  The SSVS would require that discounts be determined only under the proposed standards.  Taxing authorities have allowed “reasonable discounts” where adequate disclosure is made of the assumptions used in arriving at the discount.
• Question 13B:  This question is another example of the need for a jurisdictional exception.  The conclusion does not consider the practicalities of obtaining the valuation report, including the time and expense that would be incurred by clients to obtain such information.  This standard is not reasonable or practical in its approach.
• Question 13C:  This question is another example of the need for a jurisdictional exception and, again, ignores the practicalities of determining this information on behalf of a client.
• Question 17:  We disagree with the conclusion that the SSVS should apply to this fact pattern.  The client is providing the average discount to be used, and the member is simply applying the mathematics to determine the final valuation number. 

The SSVS requires substantial amendments to the current form.  We strongly encourage a delay in the implementation of the SSVS so that it may be revised to provide a more practical approach to valuation standards.

Respectfully submitted,
 
John L. Di Carlo, Chairman
California Society of Certified Public Accountants
Committee on Taxation

JLD:sm

cc:
 Mr. Barry Melancon, President and CEO, AICPA
 Mr. Robert Bunting, Chairman, AICPA
 Mr. Ed Karl, Director, AICPA Tax Division
 Mr. D. Paul Regan, Chair, CalCPA
 Mr. Christopher Yahng, Chair-elect, CalCPA
 Mr. John Dodsworth, President, CAMICO
 Mr. Bruce Allen, Director, Government Relations, CalCPA