The Public Company Accounting Oversight Board has issued four documents that provide guidance on the new requirements for auditing accounting estimates and the auditor’s use of a specialist, which includes valuation experts. The four documents are:

• “Auditing Accounting Estimates”;

• “Auditing the Fair Value of Financial Instruments”;

• “Supervising or Using the Work of an Auditor’s Specialist”; and

• “Using the Work of a Company’s Specialist.”

The new requirements are effective for audits of financial statements for fiscal years ending on or after Dec. 15, 2020. For more information, the PCAOB has created two implementation pages on its website for the new estimates standard and amendments for the auditor’s use of the work of specialists.

Seller’s market sentiment is down in all market segments except for businesses with $5 million to $50 million in enterprise value. Looking back a year, seller’s market sentiment has decreased notably for businesses valued between $1 million and $2 million, dropping six percentage points from Q1 2018 (72%) to Q1 2019 (66%).  According to the “Q1 2019 Market Pulse Report,” published by the International Business Brokers Association (“IBBA”), M&A Source, and the Pepperdine Private Capital Market Project, seller’s market sentiment increased for businesses valued from $5 million to $50 million, rising from 77% in Q1 2018 to 81% in Q1 2019. “This is the first time in years that we’ve seen four out of five sectors report a dip in seller market sentiment. This is a sign the market may have peaked and more people are expecting a correction in the year or two ahead,” said Craig Everett, Ph.D., director of the Pepperdine Private Capital Markets Project at the Pepperdine Graziadio Business School. “Sellers should consider selling now or waiting another few years before the market will cycle backup to current conditions. To be clear, this doesn’t mean you won’t be able to sell your business over the next few years, but you probably won’t get the multiples you can get today. Any market pessimism or uncertainty will drive down value across the board.”