AICPA proposes framework for financial instruments valuation

The American Institute of CPAs has unveiled an exposure draft of a new framework to help CPAs and other financial professionals perform valuations of financial instruments such as derivatives, along with their underlying components.

The draft framework aims to bring more clarity and consistency to valuations of mortgage-backed securities, credit default swaps, complex bonds and other financial derivatives.

The Disclosure Framework for the Valuation of Financial Instruments and the Certified in Valuation of Financial Instruments (“CVFI”) Credential includes guidance on how to explain the characteristics of financial instruments and disclose how these securities have been valued.

The AICPA is asking for comments on the framework until Sept. 27, 2017. A related document, the Application of the Disclosure Framework for the Valuation of Financial Instruments, discusses how the framework will be applied. That document will continue to expand to cover a wider spectrum of topics and trends within the valuation profession.

The guidance will provide the basis for a new Certified in Valuation of Financial Instruments credential, which the AICPA plans to offer later this year. Once the framework has been finalized, CVFI credential holders will be required to comply with it.

“Financial instruments have become increasingly complex and determining their value has been a challenge that has adversely affected the market in the past,” said AICPA vice president of advisory services and credentialing Jeannette Koger in a statement. “With this framework, the AICPA is responding to marketplace needs by creating a standardized and replicable process for financial professionals who perform valuations on financial instruments. This framework will ensure that professionals working with financial instruments perform their engagements with independence, objectivity and consistency. We encourage all stakeholders to review and comment on the draft.”