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In a business whether it be an asset intensive operating company, a service based company or any company in between, value may be the key component and driving force that sustains operations. More particularly, valued added to the shareholders or equity interests from business operations is what allows a company to remain as a going concern. The issue arises as to how to measure value objectively in a way that can be repeated and valid in what it measures.

If the process cannot be repeated, it should not be a method to appraise value. In addition, if the process does not actually measure value but some other factor, it should not be used. The process that develops into a set way of measuring value is now called a standard of value.

Standards to report and conduct a valuation are a relatively modern concept that was not introduced until the 1980's. These standards resulted from a crisis in savings and loans originating from real estate appraisals. In these appraisals, the real estate valuation analysts appraised properties much higher than the realizable value, which resulted in substantial losses when the loans defaulted (Hitchner, 2017, p. 583).

Because of this financial crisis, the Uniform Standards of Professional Appraisal Practice was formed and was implemented in the United States in 1989 as the generally accepted set of appraisal standards ("The Appraisal Foundation," 2018). The USPAP includes 10 standards that are used to report and conduct their appraisals of value. The standards can be grouped into three sections that cover real estate, personal property, and business and intangible assets. USPAP Standard 10 is included in the business and intangible assets group.

The basis of this standard is the idea that the results of the appraisal should be expressed and communicated in an understandable and unbiased way. Under this standard there are four rules that constitute how the written and oral appraisals should be conducted, classified, must contain, and address (Hitchner, 2017, p. 591).

The amount of detail required in the report of an appraisal should eliminate most of the confusion that would result if this standard did not exist as mentioned in rule 10-2. In addition, a signed certification to the extent that the information is accurate, unbiased, and complete is mentioned in rule 10-3. This holds the appraiser accountable and should deter any malicious action to benefit the appraiser. Standard 10 like all USPAP standards are applicable and should be implemented in valuations and appraisals.

In relation to a business valuation in Whole Foods, there was an appraisal done that provided a bottom line valuation number of $42 per share resulting in a 27 percent premium (Whitten, 2017). Before this report came out, analysts had to evaluate Whole Foods in depth. Once that process was complete, the analysts wrote a report justifying their reasoning for valuing Whole Foods at the price they did.

This report amplifies the credentials of the valuation and puts investors at ease knowing this valuation was not some random, fabricated number. Not giving a detailed report on how the valuation number was finalized would put doubt in peoples' minds and would not have the same effect as applying Standard 10 of USPAP.

While having standards in life can provide order, as Christians it is necessary to recognize there is a higher standard that must be abided by than what is present here on earth. In Romans 12:2 it says, "Do not conform yourselves to the standards of this world, but let God transform you inwardly by a complete change of your mind. Then you will be able to know the will of God - what is good and is pleasing to him and is perfect."

References

Hitchner, J. R. (2017). Financial Valuation: Applications and Models, +Website (4th ed.).

Hoboken, NJ: John Wiley & Sons.

The Appraisal Foundation: Background and History. (2018).

The Holy Bible

Whitten, S. (2017, June 16). Amazon is buying Whole Foods in a deal valued at $13.7 billion.