Small- and medium-sized enterprises (SMEs) make huge contributions to the economy, constituting some 90% of all enterprises worldwide and adding significantly to gross domestic product (GDP) and employment globally. They have continued to do so in recent years despite a sometimes bumpy road to economic recovery from the global financial crisis of 2008. The process of international expansion of SMEs hasn’t slowed down and, as a result, more companies now seek financial reporting and other advice encompassing global perspective and standards. The International Valuation Standards Council (IVSC) has recognized this demand and considers it critically important to build valuation expertise and capacity through the application of consistent standards and to continue to develop a globally respected valuation profession to apply these standards with the required vigor and coherence. Having uniform valuation standards in place ensures that the environment in which SMEs operate is fair and encourages healthy competition within and across borders, thus levelling the playing field.
Current markets are distinctively more competitive and require practitioners, particularly small- and medium-sized practices (SMPs) working with SMEs, to ensure they are able to deliver what their clients demand. As such, SMPs may wish to gain recognized business valuation expertise, as discussed in a previous article.
The global application of clear valuation standards can benefit SMEs and companies of all sizes in a number of ways. Practitioners, alongside their clients, liaise with a variety of third-party organizations, such as banks, grant funders, and other external parties involved in various transactions. In order to meet their expectations and develop meaningful relationships based on mutual trust, the companies need to demonstrate a high level of credibility. The consistent application of fair value measurement implemented by well-qualified valuation practitioners is an important means for achieving this goal. All parties involved in the business process, regardless of the sector, can benefit from education about the importance of valuations standards, which, once applied, help companies to operate in a more accountable and transparent way. As such, valuation standards ultimately can improve companies’ reputation and positioning in the marketplace.
Safeguarding such a credible position is vital, especially when management resources are particularly limited for smaller enterprises. This is also why the practitioner role is so important and the IVSC has been focused on developing and promoting professional standards. The valuation profession is still not regarded globally in the same terms as accountancy. A consistent approach to both is absolutely critical to providing financial stability and instilling trust in the marketplace.
Although there are many examples across the world of highly skilled valuation professionals, it is important that this is replicated consistently everywhere through the use of globally recognized standards. With business demographics and technology moving ever so fast in a modern world, valuation professionals need to jointly address the changes occurring to offer high-quality, value-adding services tailored to the specific needs of clients. A number of professional accountancy organizations around the world are recognizing the specialist skills required by their members in undertaking business valuations and have become members of the IVSC to contribute to the development of a credible valuation practice.
Above all, it is transparency and comparability that will help SMEs to flourish in global markets. Therefore, the IVSC is keen to remove the inconsistencies that hinder them. We firmly believe that in the next few years, a number of initiatives will help us move closer toward established international valuation standards and international professional standards that will guide the valuation profession, provide support to companies of all sizes, and help drive the global economy.
