AICPA - Accredited in Business Valuation (ABV) 2025 Practice Test

ABV Exam Format | Course Contents | Course Outline | Exam Syllabus | Exam Objectives

The Accredited in Business Valuation (ABV ®) credential is granted exclusively by the AICPA to CPAs and qualified valuation professionals who demonstrate considerable expertise in valuation through their knowledge, skill, experience and adherence to professional standards. To obtain the credential, you must pass the two-part, modular ABV Exam. The exam requirement is waived for candidates who have passed the ASA credential exam of the American Society of Appraisers, CFA exam level III of the CFA Institute or CBV credential exam of the Canadian Institute of Chartered Business Valuators.

The AICPAs ABV credential is the most rigorous and prestigious of the business valuation certifications. In a short time, it has become an essential marketing tool for the CPA planning to specialize in this lucrative practice area.

Review sources of data, techniques, and methods used to analyze business interest, value drivers, and risk assessment.
Distinguish among the three primary approaches to value (and related hybrid approaches), as well as identify and apply various types of valuation adjustments and the reconciliation of value estimates.
Identify key areas related to valuation in the conceptual framework of fair value accounting, accounting for business combinations, and accounting for goodwill impairment.
Identify the five basic steps of a valuation engagement.
Differentiate among standards of value, premises of value, and levels of value.
Identify valuation related professional standards and guidelines issued by AICPA (for example, VS section 100).

Newly enhanced and closely aligned with the ABV exam, the AICPAs ABV Exam Review is the only comprehensive BV examination review program backed by the resources and collective expertise of business valuation professionals associated with the nation's premier membership organization for CPAs.

The AICPAs ABV credential is the most rigorous and prestigious of the business valuation certifications. In a short time, it has become an essential marketing tool for the CPA planning to specialize in this lucrative practice area. A key step towards becoming an ABV, the ABV exam tests a comprehensive range of business valuation knowledge.

The ABV exam is offered in a two-part, modular format. Module 1, "Approaches", covers Content Specification Outline (CSO) section II and chapters 4-7 and 9 of ABV Exam Review. Module 2, "Analysis and Related" covers CSO sections I & III and chapters 1-3 and 8 of ABV Exam Review. Please reference the CSO before preparing for the ABV exam.

NOTE: Taking this review course does not guarantee that the candidate will successfully pass the ABV exam. This course reviews most of the items on the exams content specific outline and is not meant to teach topics to the candidate for the first time. A significant amount of independent reading and study will be necessary to prepare for the exam, regardless of whether or not the candidate completes this review course.

Key topics:
Professional Standards, the Engagement, and Standards of Value
Fair Value for Financial Reporting Based on Financial Accounting
Standards Board Accounting Standards Codification (FASB ASC) 820
Subject Company Analysis
Income Approach to Value
Cost of Capital
The Market Approach to Valuation
Asset-Based Approach
The Valuation of Intangible Assets and Intellectual Property
Valuation Adjustments: Discounts and Premiums and Reconciliation of Indicated Values

I. Foundation of Valuation Theory (Exam Part 1 — 50%)
A. Professional standards
B. Financial reporting
C. Defining the engagement
D. Sources of economic and industry data
E. Macro-economic and environmental analysis
F. Industry analysis
G. Subject entity analysis
II. Implementation of Valuation Methods (Exam Part 2 — 50%)
A. Valuation approaches
B. Intellectual property and other intangible assets
C. Discounts, premiums and other adjustments
D. Conclusion of value
A. Professional standards
1. AICPA VS Section 100, Valuation of a Business, Business Ownership
Interest, Security, or Intangible Asset (VS Section 100)
2. AICPA Code Of Professional Conduct ET 1.200.001 “Independence
rule” and interpretations of the “nonattest services” subtopic [1.295]
(Pronouncements and regulations related to independence
requirements when providing business valuation services to attest clients)
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapter 2
Financial Valuation: Applications and Models, chapter 12
B. Financial Reporting
1. Fair value measurements (FASB ASC 820)
2. Business combinations (FASB ASC 805)
3. Goodwill and other intangibles and measuring impairment
(FASB ASC 350)
4. Accounting for the impairment of long-lived assets (FASB ASC 360)
5 Compensation — stock compensation (FASB ASC 718)
6. Contingent considerations
7. AICPA Statement on Auditing Standards AU Sec. 336 (Using the Work
of a Specialist) And AU Sec. 328 (Auditing Fair Value Measurements
And Disclosures)
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapter 19
Financial Valuation: Applications
and Models, chapter 24
C. Defining the engagement
1. Standards of value (e.g., fair market value, fair value — financial
reporting, investment value, intrinsic [fundamental] value)
a. Internal Revenue Service (IRS) Revenue Ruling 59–60 (fundamental
valuation considerations and the definition of fair market value)
2. Relationship between purpose of the valuation and the standard of value
3. Understanding the ownership characteristics of the interest being valued
4. Premise of value for business interests (i.e., ongoing concern and liquidation)
5. Engagement letters (e.g., purpose and content)
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapters 3, 4 and 16
Financial Valuation: Applications
and Models, chapter 2
VS Section 100
D. Sources of economic and industry data
E. Macro-economic and environmental alalysis
F. Industry analysis
1. Industry structure and life-cycle analysis
2. Competitive strategies and analysis
G. Subject entity analysis
1. Entity documents (e.g., operating agreements, buy-sell agreements and bylaws)
2. SWOT (strengths, weaknesses, opportunities and threats) analysis
3. Firm economics (cost structure and pricing power marginal analysis)
4. Historic and forecast financial statements
a. Common size
b. Trend analysis
c. Financial ratios (a list of definitions, ratios and formulas provided during the exam is included at the end of this document)
d. DuPont analysis; return on equity and return on assets
5. Adjustments to historic and forecast financial statements
a. Normalizing
b. Control vs. non-control
c. Separation of operating and non-operating items
d. Off balance sheet items
1) Other adjustments
2) Implied tax adjustments
3) Inusual and/or non-recurring items
4) GAAP based adjustments
Section II. Implementation of Valuation Methods (Exam Part 2 — 50%)
This section covers knowledge of the three primary approaches to value; intellectual property and intangible assets; levels of
value; discounts; premiums and the conclusion of value.
A. Valuation approaches
1. Income approach
a. General theory
b. Sources of data
c. Commonly used methods
1) Capitalized economic income/cash flow method (CCF), including Gordon Growth Model (consistent growth model)
2) Discounted economic income/cash flow method (DCF), including Gordon Growth Model (two-stage model)
3) Excess earnings method (hybrid method)
d. Commonly used models — direct equity model versus invested capital model
e. Types of benefit streams and selection
f. Cost of capital concepts and methodology and other models
1) Capital asset pricing model (CAPM) and beta (B) including unlevering and relevering betas
2) Build-up method
3) Duff and Phelps risk premiums
4) Weighted average cost of capital
5) Understanding the security market
6) Understanding option pricing theory
g. Selection of appropriate time (including mid-year convention)
2. Market approach
a. General theory
b. Sources of data
c. Commonly used methods
1) Transactions in subject companys stock
2) Guideline publicly traded company method
3) Guideline merged and acquired company (transaction) method
d. Selecting guideline companies
e. Statistics related to valuation analysis
1) Understanding measures of central tendency (e.g., Arithmetic, harmonic and geometric means and median)
2) Understanding measures of dispersion (e.g., Variance and standard deviation)
3) Understanding statistical strengths of numerical relationships (including covariance, correlation, coefficient of determination and coefficient of variation)
4) Understanding linear regression
f. Equity versus invested capital (including price multiples)
g. Selection of appropriate time periods
h. Selection and adjustment of appropriate multiples
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapters 9 and 10
Financial Valuation: Applications and Models, chapter 8
3. Asset approach
a. General theory
b. Sources of data
c. Adjusted (net) asset method
d. Considerations in liquidation
e. Issues in valuing intangible assets
f. Tax affecting the balance sheet
B. Intellectual property and other intangible assets
1. Valuation approaches and methods
2. Valuing specific intangible assets
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapter 20
Financial Valuation: Applications
and Models, chapter 24
C. Discounts, premiums and other adjustments
1. Levels of value appropriate to the engagement
a. Control strategic (public or private company)
b. Minority/control standalone liquid (public company)
c. Control liquid (private company)
d. Control standalone (private company)
e. Minority non-marketable (private company)
2. Discount for lack of control (DLOC) and control premium
a. Sources of data
b. Ownership characteristics
c. Magnitude
3. Discount for lack of marketability (DLOM)
a. Sources of data
b. Ownership characteristics
c. Restrictions and transferability
d. Magnitude
4. Discount and premiums — understanding the empirical studies
5. Allocation between voting and non-voting stock
6. Other valuation discounts and adjustments
a. Market absorption and blockage discounts
b. Key person/thin management discounts
c. Built-in gains tax discount
d. Nonvoting stock discount
Understanding Business Valuation: A Practical
Guide to Valuing Small to Medium-Sized
Businesses, chapters 14 and 15
Financial Valuation: Applications
and Models, chapter 10
D. Conclusion of value
1. Reconciliation of indicated values
2. Reasonableness of conclusion

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Accredited in Business Valuation (ABV)
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QUESTION: 319
______________ deals with the liquidation of the subject business ownership interest.
A. Investment
B. Reinvestment
C. Marketability
D. Discount quantification
Answer: C
QUESTION: 320
The degree to which an asset, business, business ownership interest, or security can
readily be converted into cash without significant loss of principal is called:
A. Marketability
B. Liquidity
C. Investor ownership
D. Public leadership
Answer: B
QUESTION: 321
When non-controlling business ownership interests are valued by reference to the prices
paid for guideline actively traded securities, the benchmark for the lack of marketability
of the non-controlling ownership interests is the active public securities markets, this
publicly traded counterpart value is often called:
A. Freely traded value
B. Restricted traded value
C. Business traded value
D. None of the above
Answer: A
QUESTION: 322
What is identical in all respects to the freely traded stock of a public company except for
the fact that it is restricted from trading on the open stock market for a certain period?
A. Letter stock
B. Empirical shares
C. Raising capital
D. Trading ownership
93
Answer: A
QUESTION: 323
What is a publicly traded company that must file Forms 10-K, 10-Q, and other
information with the Securities Exchange Commission (SEC)?
A. Stock Exchange
B. over-the-counter capital
C. Non-reporting company
D. Reporting company
Answer: D
QUESTION: 324
Which study found that companies with stock listed on national exchanges had lower
discounts on their restricted stock transactions than did companies with stock traded over-
the-counter (OTC)?
A. Trout study
B. Moroney study
C. Gelman study
D. Maher study
Answer: A
QUESTION: 325
The Johnson study analyzed following factors that might influence the size of the
discount EXCEPT:
A. Positive net income
B. Sales volume
C. Transaction value
D. Gross income
Answer: D
QUESTION: 326
Which model simply estimates a time horizon at which the interest will be liquidated, a
liquidating price based on annual percentage growth in value from the valuation date, and
interim cash flows to the holder?
94
A. Qualitative Marketability Discount Model
B. Qualitative Liquidity Discount Model
C. Quantitative Marketability Discount Model
D. Quantitative Liquidity Discount Model
Answer: C
QUESTION: 327
Which of the following is NOT the factor that affects the degree of marketability?
A. put right
B. Dividend payment
C. Potential Buyer
D. Asset capitalization
Answer: D
QUESTION: 328
The process of ______________ is the analysis of the alternative valuation indications in
order to arrive at a final value estimate.
A. Reconciliation
B. Reassessment
C. Revaluation
D. Renegotiation
Answer: A
QUESTION: 329
Which procedure does not quantitatively justify the valuation synthesis process, it does so
in a qualitative manner?
A. Explicit weighting
B. Implicit weighting
C. Business weighted average
D. Procedural weighted average
Answer: B
QUESTION: 330
95
Which of the following type of final value estimates may be appropriate, given the
purpose and objective of the valuation?
A. A point estimate
B. A range of value
C. A relationship value
D. All of the above
Answer: D
QUESTION: 331
According to the 2006 edition of the Uniform Standards of Professional Appraisal
Practice (USPAP), the definition of an appraisal, the act or process of developing an
opinion of value; an opinion of value is called:
A. Evaluation
B. Appraisal
C. Assessment
D. Analysis
Answer: B
QUESTION: 332
The length, type, and (to a certain extent) content of a business valuation report may be
influenced by:
A. The valuation client
B. Any applicable statutory authority
C. The courts, through published judicial precedent
D. All of the above
Answer: D
QUESTION: 333
The Uniform Standards of Professional Appraisal Practice (USPAP) Ethics Rule is
divided into which four sections?
A. conduct, management, confidentiality and record keeping
B. planning, reconciliation, confidentiality and record keeping
C. conduct, management, examining and record keeping
D. planning, management, testing and record keeping
96
Answer: D
QUESTION: 334
The price at which such property would change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or to sell, and both having
reasonable knowledge of relevant facts is called:
A. Fair market value
B. Appraisal value
C. Standard value
D. Financial value
Answer: A
QUESTION: 335
Method that is commonly used in the valuation of closely held companies in order to
minimize the differences between the subject company and the guideline companies is
known as:
A. Product-line valuation method
B. Qualitative adjustment method
C. Invested capital valuation method
D. Market leverage valuation method
Answer: C
QUESTION: 336
For a non-controlling ownership interest in Warm Chicken, which of the following factor
is considered, that have an impact on the selection of the appropriate discount for lack of
marketability?
A. Size of the block
B. Transaction activity
C. Dividends
D. All of the above
Answer: D
QUESTION: 337
Which of the following is the most frequently encountered reason for needing to value
debt securities?
97
A. Purchase or sale for cash
B. Exchange of equity for debt, or vice versa
C. Allocating total enterprise value among classes of securities in a leveraged buyout,
recapitalization (including tax-free reorganizations), or bankruptcy reorganization
D. All of the above
Answer: D
QUESTION: 338
Which theory states that the fair market value of an investment is equal to the present
value of the future payments, discounted back to the current time at an appropriate
discount rate?
A. Valuation
B. Investment
C. Interest payment
D. None of the above
Answer: D
QUESTION: 339
The rate of interest that, when applied to the expected future payments on a debt security,
produces a present value of the payments equal to the debt securitys observed market
price is called the _____________ of that security.
A. Maturity of debt
B. yield to maturity
C. Interest maturity
D. Cost Maturity
Answer: B
QUESTION: 340
Which of the following is the information needed for estimating the value of a closely
held debt security?
A. the amount of future payments generated by the debt security
B. the timing of the future payments generated by the security
C. the appropriate rate of interest or yield to maturity to apply to the future payments to
estimate the present value
D. All of the above
98
Answer: D
QUESTION: 341
If the market-determined yield to maturity for a debt security is equal to the securitys
coupon interest rate, the securitys fair market value is equal to its face or par value.
A. True
B. False
Answer: A
QUESTION: 342
What allows the debtor to repay the debt prior to its maturity?
A. Fund provision
B. Call provision
C. Debt provision
D. Security provision
Answer: B
QUESTION: 343
Which provision requires the debt issuer to call or retire a contractually determined
portion of the entire debt issue periodically over time prior to the issues maturity date?
A. collateral provision
B. risk provision
C. sinking fund provision
D. Tax provision
Answer: C
QUESTION: 344
A debt security that has no pledge of specific property or assets as collateral for the debt
is called:
A. debenture
B. indenture
C. convention
D. covenant
Answer: A
99

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