ABV Test Questions & Answers 2024/2025
What are the two types of engagements used to estimate value as outlined in the AICPA's SSVS No. 1? - ANSWERSA valuation engagement - an engagement to estimate value of a subject interest by performing appropriate valuation procedures and is free to apply...
What are the two types of engagements used to estimate value as outlined in the AICPA's SSVS No. 1? -
ANSWERSA valuation engagement - an engagement to estimate value of a subject interest by performing
appropriate valuation procedures and is free to apply the valuation approaches and methods he or she
deems appropriate.\n \nA calculation engagement - an engagement to estimate value wherein the
valuation analyst and the client agree on the specific valuation approaches and valuation methods that
will be used. A calculation engagement generally does not include all of the valuation procedures
required for a valuation engagement.
What is the AICPA Code of Professional Conduct - Rule 101 - ANSWERSRule 101 deals with the
responsibility of the professional to be independent in order to perform certain professional services
such as audits and reviews of financial statements.
What is the AICPA Code of Professional Conduct - Rule 102 - ANSWERSRule 102 covers ethical
considerations (integrity and objectivity). The analyst should maintain objectivity and integrity, shall be
free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her
judgement to others. The analyst is an advocate for his or her professional opinion, not the client.
What is AICPA Code of Professional Conduct - Rule 201 - ANSWERSA member shall comply with the
following:\n \nProfessional Competence\nDue Professional Care\nPlanning and Supervision\nSufficient
Relevant Data
What is Revenue Ruling 59-60? - ANSWERSIn valuing the stock of closely held corporations, or the stock
of corporations where market quotations are not available, all other available financial data, as well as all
relevant factors affecting the fair market value must be considered for estate tax and gift tax purposes.
No general formula may be given that is applicable to the many different valuation situations arising in
the valuation of such stock. However, the general approach, methods, and factors which must be
considered in valuing such securities are outlined.
What is Revenue Ruling 65-192? - ANSWERSThe general approach, methods and factors outlined in
Revenue Ruling 59-60, C.B. 1959-1, 237, for use in valuing closely-held corporate stocks for estate and
gift tax purposes are equally applicable to valuations thereof for income and other tax purposes and also
,in determinations of the fair market values of business interests of any type and of intangible assets for
all tax purposes.
What is Revenue Ruling 65-193? - ANSWERSRevenue Ruling 59-60, C.B. 1959-1, 237, is hereby modified
to delete the statements, contained therein at section4.02(f), that `In some instances it may not be
possible to make a separate appraisal of the tangible and intangibleassets of the business. The enterprise
has a value as an entity. Whatever intangible value there is, which issupportable by the facts, may be
measured by the amount by which the appraised value of the tangible assetsexceeds the net book value
of such assets.'The instances where it is not possible to make a separate appraisal of the tangible and
intangible assets of a businessare rare and each case varies from the other. No rule can be devised which
will be generally applicable to such cases.
What is Revenue Procedure 66-49? - ANSWERSThe purpose of this procedure is to provide information
and guidelines for taxpayers, individual appraisers, and valuation groups relative to appraisals of
contributed property for Federal income tax purposes. The procedures outlined are applicable to all
types of noncash property for which an appraisal is required such as real property, tangible or intangible
personal property, and securities. These procedures are also appropriate for unique properties such as
art objects, literary manuscripts, antiques, etc., with respect to which the determination of value often is
more difficult.
What are the valuation engagement steps? - ANSWERS1. Define the engagement\n2. Gather the
information on the subject interest\n3. Analyst the information\n4. Determine an indication of value for
the subject interest\n5. Issue a report
What are the types of reports? - ANSWERS1. Valuation Detailed Report\n2. Valuation Summary Report\
n3. Calculation Report\n4. Oral Report
What company specific factors does Revenue Ruling 59-60 identify as fundamental and requiring careful
analysis? - ANSWERS1. Nature of the business and the history of the enterprise from its inception\n2.
Economic outlook in general and the condition and outlook of the specific industry in particular\n3. Book
value of the stock and the financial condition of the business\n4. Earning capacity of the company\n5.
Dividend-paying capacity\n6. Whether or not the enterprise has goodwill or other intangible value\n7.
Transactions involving company's stock\n8. Market price of stocks of companies engaged in the same or
similar lines of business that are actively traded in a free and open market
What information does SSVS No. 1 identify as necessary to perform a subject company analysis? -
ANSWERS1. Nature of the subject interest\n2. Scope of the valuation engagement\n3. Intended use of
, the valuation\n4. Applicable standard of value\n5. Applicable premise of value\n6. Assumptions and
limiting conditions\n7. Applicable governmental regulations or other professional standards
What non-financial information should a valuation analyst consider under SSVS No. 1? - ANSWERS1.
nature, background and history\n2. facilities\n3. organizational structure\n4. management team\n5.
classes of equity ownership and rights\n6. products/services\n7. economic environment\n8.
geographical markets\n9. industry markets\n10. key customers and suppliers\n11. competition\n12.
business risks\n13. strategy and future plans\n14. governmental or regulatory environment
What non-financial information should a valuation analyst consider under Revenue Ruling 59-60? -
ANSWERS1. operating and investment assets\n2. capital structure\n3. sales\n4. non-recurring or non-
operating items
What is Revenue Ruling 59-60's guidance on restrictive agreements? - ANSWERSIf the issuing company
reserves the right to repurchase ownership interests at a certain price, the price under certain
circumstances may be reflective of fair market value for estate tax purposes, but not necessarily for gift
tax purposes.
Describe Port's Five Competitive Forces - ANSWERS1. Bargaining Power of Suppliers\n2. Bargaining
Power of Customers\n3. Threat of New Entrants\n4. Threat of Substitute Products/Services\n5.
Competition Between Companies
Under SSVS No. 1 what financial information should a valuation analyst obtain? - ANSWERS1. Historical
Financial Information\n2. Prospective Financial Information\n3. Comparative Summaries of Financial
Statements\n4. Comparative Common-Size Financial Statements\n5. Comparative Common-Size Industry
Financial Information\n6. Income Tax Returns\n7. Owner Compensation\n8. Key Person/Officer Life
Insurance\n9. Management's Responses to Contracts, Off-Balance Sheet Items and Prior Sales of
Company Stock
Define the DuPont formula. - ANSWERSThe DuPont formula is also referred to as a return on equity ratio.
It integrates profitability, asset turnover, and leverage into one financial measure.
What are the four most common methods of applying the Market Approach? - ANSWERS1. Prior
Transactions of Company Stock2. Guideline Public Company Method (Using Multiples)\n3. Merger and
Acquisition Method (Guideline Company Transaction Method or Direct Market Data Method)\n4. Rules
of Thumb (Industry Method)\n\n
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