Anyone who has spent time in standard setting will know that myth is often more powerful than fact among the intended users of any standard. Since it is infinitely more fun to learn about what a standard says from a friend of a friend in the bar than it is to do anything as boring as reading it for yourself, this is not altogether surprising.
Many such myths concern supposed differences between the International Valuation Standards (IVSs) and the Uniform Standards of Professional Appraisal Practice (USPAP), the latter being issued by The Appraisal Foundation (TAF) under a mandate from the federal government of the USA. I have heard many proponents of one set of standards accuse the other of being too prescriptive or too detailed, only to hear the same accusations coming back the other way a short while later. If you press a little harder you will usually find that these are misunderstandings based on second hand information, fuelled by the suspicion that dragons await once you reach the boundaries of your known world.
While pedants enjoy the sport of spotting variations in the language used and then get excited speculating whether different meaning is intended, the rather more mundane truth is that once one gets past some fairly superficial differences of presentation and terminology, the mandatory sections of the two sets of standards are remarkably similar.
This should not be a great surprise. The IVSC and TAF have been working together over a long period. In the early 2000s TAF was represented on the IVSC Standards Board, and more recently TAF has been a sponsor and member of the IVSC. Back in 2006 TAF and the IVSC entered into the “Madison Agreement” to cooperate in standard setting with the aim of reducing differences. Since I was heavily involved in the major rewrite of the IVSs that was completed in 2010, I know that more than a few of changes made then were influenced by USPAP. And in 2014 the Madison Agreement was updated with the parties signing a new memorandum in which they committed to work together to remove any remaining material differences by 2017. The stated objective of this latest agreement is to ensure that a valuation prepared under USPAP would be also compliant with the IVSs.
Removing the few remaining obstacles that currently prevent a US appraiser applying USPAP simultaneously complying with the IVSs is a prize worth having. Most importantly it conveys to clients and others relying on valuations that the profession is in harmony around the world and working to the same globally accepted principles, thus strengthening the way in which the profession is perceived by those who rely on valuations. However, it is important to note that the intention is not to try to make the two sets of standards identical, nor for one to replace the other.
Because USPAP is a national standard that has to fulfil a specific role under US federal legislation, the two standards can never be identical. There are some details in USPAP which would be inappropriate in other jurisdictions and therefore could never be required in the IVSs. Certain wording in USPAP has been subject to legal interpretation in the USA, but that wording does not always work as well in an international context because of legal or cultural differences so alternatives may be needed in the IVSs. On the other hand, USPAP may need to include some additional material to ensure that a principle in the IVSs is interpreted and applied consistently in the context of US law and practice. However, these differences should not obscure the fundamental similarity between the key objectives of both standards.
There is of course precedent for trying to merge a USA standard with one used by the rest of the world. Since publicly agreeing to remove differences between US Generally Accepted Accounting Principles (US GAAP) and the International Financial Reporting Standards (IFRS) in 2002, the FASB and IASB have invested significant resources in trying to achieve this. However, while some projects have resulted in standards that are effectively identical, for example those for “Fair Value Measurements”, many differences still remain. Last year, the current chairman of the FASB quashed speculation that the US may abandon US GAAP in favour of IFRS, noting the increasing recognition among US stakeholders that legal, regulatory, and cultural differences among and between jurisdictions are likely to result in at least some variation in the way that accounting standards are written, applied in practice and enforced.
It is worth noting that compliance with either USPAP or the IVSs involves following either the “Standards Rules” in USPAP or the “Requirements” in IVS. Both sets of standards have a significant amount of additional material to assist compliance by discussion, illustration or example. In the case of USPAP this includes Advisory Opinions and Frequently Asked Questions; in the case of the IVSs it includes the Framework, Commentaries and Application Guidance. There is no current intention to converge this non mandatory material, although collaboration on producing joint guidance on matters of mutual interest may be down the line once the mandatory material is aligned.
Under both sets of standards, rules and requirements apply from the inception of a valuation instruction, covering matters such as the ethical prerequisites, competency and matters that should be communicated to the client before the valuation is finalised. However, as the tangible output of a valuation or appraisal is the report I have prepared a table which compares the current reporting requirements under the respective standards. A link to this table can be found at the end of this article. The table demonstrates that there are very few reporting requirements in the IVS that are not covered by a very close equivalent in USPAP. Hopefully, this will persuade doubters that there is nothing to fear from the project to resolve the few remaining differences that matter between the IVSs and USPAP.
While apocryphal tales of horrors lurking in one or the other set of standards may make for good entertainment, wise valuers and appraisers should treat them with appropriate caution. If the next editions of each set of standards are influenced by something that currently appears in the other, only subtle changes in the way practitioners prepare and report their valuations and appraisals are likely.
 See “Global Standards – The Impossible Dream”