Types of Business Valuation Engagements & Reports

This page explains the different types of business valuation engagements and reports, and how to determine which approach is appropriate for your situation.

Not all valuations are the same. The type of engagement depends on the purpose of the valuation, the level of reliance expected, and the degree of scrutiny the work may face. Selecting the right type ensures that the analysis is both appropriate and cost-effective.

Two Primary Types of Valuation Engagements

This brief video explains the difference between a Valuation Engagement and a Calculation Engagement and thei different report types.

Under both NACVA Standards and AICPA Statement on Standards for Valuation Services, Business Valuations fall into two categories:

Valuation Engagement with a Conclusion of Value: This is the gold standard. It’s a detailed, comprehensive process that concludes with a well-supported value for your business.

Calculation Engagement: It’s a lighter version, limited in scope and number of Approaches and Methods. Provides a ‘calculated value’—helpful for planning or internal decisions

The distinction between them is based on scope, flexibility, and level of assurance.

Valuation Engagement with a Conclusion of Value

A Valuation Engagement with a Conclusion of Value is the most comprehensive and rigorous type of valuation.

Key Characteristics

Full consideration of all relevant valuation approaches (income, market, and asset)
Independent professional judgment in selecting methods and assumptions
Extensive analysis and documentation
Designed to withstand third-party scrutiny

When It Is Typically Required

IRS filings (estate, gift, charitable contributions)
Litigation and dispute matters
SBA and other lender-required valuations
Mergers, acquisitions, and significant transactions

Level of Reliance

This is the highest level of assurance and is generally required whenever the valuation will be reviewed by third parties such as courts, tax authorities, lenders, or boards.

Types of Reports for a Valuation Engagement with a Conclusion of Value

A Valuation Engagement can be delivered in different formats depending on the level of detail required.

Detailed Report

A Detailed Report provides a comprehensive explanation of:

company background and operations
economic and industry context
financial analysis and normalization adjustments
valuation methodologies and assumptions
reconciliation and final conclusion

Please see the Report contents’ schedule for details of the Detailed Report contents.

👉 Typically used for:

IRS reporting
litigation and disputes
high-value transactions
situations requiring maximum defensibility

Summary Report

A Summary Report presents the key elements of the valuation in a more concise format while still supporting a Conclusion of Value.

Please see the Report contents’ schedule for details of the Summary Report contents.

👉 Typically used for:

transactions
financing
internal decision-making with some third-party reliance

Oral Report

An Oral Report may be used in limited circumstances, typically accompanied by supporting materials.

Please see the Report contents’ schedule for details of the Oral Report contents.

Note: NACVA Standards do not require Oral reports to be provided in any physical form, however, we will provide a written “Oral Report” with the information shown on the Report contents’ schedule.

👉 Typically used for:

transactions
financing
internal decision-making with some third-party reliance

Calculation Engagement

Key Characteristics

Limited scope
Agreed-upon methods and assumptions – not all three approaches need to be considered (Market, Income, and Asset)
Reduced analysis and documentation
Faster and more cost-effective

A Calculation Engagement includes a Calculation report. Please see the Report contents’ schedule for details of the Calculation Report contents.

👉 Typically used for:

management planning
early-stage decision-making
preliminary valuation discussions
situations with limited third-party reliance

Level of Reliance

A Calculation Engagement provides a reasonable estimate of value but is not intended to withstand the same level of scrutiny as a Valuation Engagement.

Choosing the Right Approach

The choice between a Valuation Engagement and a Calculation Engagement depends on:

purpose of the valuation
who will rely on the report
level of scrutiny expected
time and cost considerations

A simple way to think about it:

A Valuation Engagement is comparable to a full diagnostic exam.
A Calculation Engagement is more like a targeted check-up.

Both are useful—but they serve different purposes.

When a Full Valuation Engagement Is Required or Strongly Recommended

While both approaches are valid, certain situations require—or strongly favor—a Valuation Engagement with a Conclusion of Value, often supported by a Detailed Report.

These situations are characterized by third-party reliance, legal exposure, or long-term consequences.

IRS and Tax-Related Matters

A full valuation is typically required when the analysis may be reviewed by tax authorities, including:

Gift Tax reporting (Form 709)
Estate Tax filings (Form 706)
Charitable contributions of business interests (Form 8283)
Transfers to irrevocable trusts and similar structures

These situations often involve:

lifetime exemption calculations
“adequate disclosure” requirements
potential review years after the transaction

👉 A Detailed Report is generally necessary to support defensibility.

Litigation and Dispute Matters

A full valuation is required when the work may be used in legal proceedings, including:

Divorce and marital dissolution
Partner and shareholder disputes
Solvency and insolvency opinions
Any matter involving expert testimony or court review

These engagements require:

full documentation
methodological transparency
the ability to withstand cross-examination

👉 Calculation engagements are generally not appropriate in these contexts.

Financing and Lender Requirements

Valuations may be required by lenders in situations such as:

SBA 7(a) loans, particularly involving ownership transfers
Commercial financing tied to business value or cash flow
Management buyouts and leveraged transactions

In these cases:

lenders often define the required scope
the valuation supports underwriting decisions

👉 A Conclusion of Value is typically expected.

Transactions and Board-Level Decisions

A full valuation is strongly recommended for:

Mergers and acquisitions
Sale of a business
Significant ownership changes
Board-level strategic decisions

This is particularly important for:

medium and larger businesses
situations involving multiple stakeholders
transactions where pricing must be justified

👉 A Detailed Report provides the level of rigor expected in these environments.

When the Stakes Are High

Even outside formal requirements, a full valuation is often appropriate when:

the value is material to the owner’s net worth
decisions are difficult to reverse
multiple parties rely on the outcome

How This Connects to Valuation Purpose

Each valuation purpose discussed on this site corresponds to a different level of required rigor.

As a general framework:

Tax, legal, and dispute-related purposes → require a Valuation Engagement with a Detailed Report
Financing and Significant Transactions → typically require a Conclusion of Value, but may be supported by a Summary Report, depending on audience and significance.
Planning and exploratory work → may begin with a Calculation Engagement

Each purpose page provides specific guidance based on its context.

Engagement Scope and Report Differences

The table below summarizes the differences in scope and reporting between engagement types.

A Structured and Transparent Approach

At Gato Consulting, valuation engagements are aligned with the intended use of the analysis. The objective is to provide the appropriate level of rigor—no more and no less—based on the needs of the engagement.

This ensures that clients receive work that is both defensible and cost-effective, consistent with the core differentiators presented below.