Valuations are an important part of resolving property and support issues in a family law matter. Assets subject to being valued include the matrimonial homes, family businesses, hobby farms, and securities held in investment portfolios. An income stream from investments, rental properties, and family business are also common sources from which support obligations are paid. The relevant family law legislation does not define the term ‘value’. Courts have relied, in most cases, on the definition of fair market value of an asset. A common definition of fair market value is The highest price available in an open market expressed in terms of money or money’s worth in Canadian dollars between willing, informed, and prudent buyer(s) and seller(s) acting voluntarily and at arm’s length to each other. Know that other approaches to valuation exist and may be used depending on the asset being valued. Just as there are unique elements to each family, a valuation report is unique to each business being considered. The value at a specific point in time is captured by the valuation. To support this first principle, hindsight offered by information gathered and available after the valuation date will not be considered. If the asset is not being sold as is the case for most family law valuations, there will be no open market. In this scenario, a hypothetical (also called ‘notional’) market will be imposed to determine value. There is no correct irrefutable answer to the question ‘what is the value of this asset at the close of business on this date?’ A reasoned and logical approach by the valuator should confine the inevitable subjective aspects of the final report to values acceptable to the spouses and their lawyers. Typically a narrow range of value is stated as the determined value. Here are a few of the many facets to a valuation: approach (liquidation or going concern), calculations (which methodologies were used and are they consistently applied throughout the report?), assumptions (are they reasonable or biased in favour of one spouse?), scope of work (is the scope appropriate for the purpose of the valuation?) Were all necessary persons interviewed, independent sources contacted, market research undertaken, and relevant documents reviewed by the valuator? Conclusions (does the report set out what it said it would do in the introduction and terms of engagement?) Bottom line: Retain a qualified and experienced valuator who is a member in good stating of a regulatory body. They are accountable to the client, to the public, and to their regulatory body for the report they produce. Land Ownership will be confirmed and, in some instances, the dimensions may be surveyed. Not only is technical expertise to properly conduct the valuation required, field expertise is also prized. Rural and agricultural properties with production and processing facilities will be assessed differently than urban residential and industrialized areas. Nearness to urban centres, heritage designations, commercial leases, and related debt instruments all impact value. Regulated quota systems, changing technologies, and production cycles also affect value. Family Business The Canadian Institute of Chartered Business Valuators developed a tiered standard for the reporting of business valuations. The Comprehensive Valuation Report offers the highest level of scrutiny and analysis whereas the lowest level, Calculation Report, provides a conclusion based on a minimal level of review with little or no market or personnel collaboration. The terms of engagement will confirm the client’s choice of report after consultation with their lawyer to suit the purpose of the valuation. If the family law matter was being argued in court through the litigation process, the court ready report choice would be the Comprehensive Valuation Report. For clients involved in an interest based process such as the mediation or collaborative approaches, the Estimate Valuation Report, the middle tier report choice offering the conclusion based on limited review, analysis and corroboration, is often selected. Evaluating the Valuator’s Report Once in receipt of the other spouse’s valuator’s report there is a need to carefully review the report with your own valuator with your lawyer present to look for weaknesses, errors, or miscalculations. If you are using litigation or negotiation approach, this is standard practice. If the chosen process is the collaborative approach, and there are serious questions about the report, the first avenue is to raise the issues with the valuator with both counsel present. If the issues are not resolved satisfactorily, there may be a benefit to your client to take a closer look at the report prepared by engaging another expert with notice to the other spouse. As part of the preliminary preparation, the valuator should meet with the owner client and their lawyer to understand the subtleties of the business. Once the draft report is provided to the client and their lawyer the valuator explains their assumptions, facts, and calculations relied upon. At this meeting the methodology and approach are also carefully scrutinized and the valuator’s conclusions are explained. The lawyer negotiating on behalf of the client is the one who is ‘hands-on’ for the whole exercise. Why? Business valuations become the basis for calculating the entitlements to child and spousal support so the foundation and conclusions of the valuation must be accurate.