By Howard A. Lewis, ABAR, AVA – IBA Executive Director
It’s been said that “too many standards are no standards at all.” In our profession, standards have come to be known as an “alphabet soup,” the “real standards” have been challenged to “stand up” and show themselves, and business appraisers across the country are increasingly concerned with the confusion and potential risks involved in learning, understanding, and applying numerous sets of standards.
Ask the typical business appraiser to explain why there are so many sets of standards and you will hear responses that contain the following words: politics, culture, habit, competition. Are these good reasons for the multiple standards our profession has produced? I don’t think so. Standards are commonly distinguished on the basis of purpose, intended user group, and the manner in which they specify requirements. I question whether our profession has sufficiently thought through these characteristics of differentiation. A generally accepted definition of the term “standard” includes all of the following: “Common and repeated use of rules, conditions, guidelines, or characteristics for products or related processes and production methods, and related management systems practices.” (Source: OMB Circular A-119). If each set of business appraisal standards contains all of the above-referenced elements (and I think they do, including the IRS valuation guidelines, which I wrote several years ago), and if the intended user group can readily be identified as business appraisers and those who commission our work, then why on earth is there such confusion and such difficulty in resolving differences between them? I suspect those who reply by citing politics, culture, habit, and competition have hit the nail on the head. Does it matter how many sets of standards there are? Most assuredly.
As an industrial engineer, tasked with the responsibility of producing high quality parts and assemblies in the elevator manufacturing industry, I knew where to find the relevant standards, and there was no confusion. Engineering standards are precise, relatively easy to communicate, and get the job done with no confusion. Certainly with no politics. And, in the elevator manufacturing business, safety is the prime consideration. Imagine debating whether one standard or another applies while millions of people trust their lives to the elevators they ride in every day.
There are too many standards out there and IBA challenges every business appraisal association to join it in harmonizing our profession’s standards once and for all.