Bojan Kunovar, CLBA
KF Finance
Ljubljana, Slovenia

Business valuation is a worldwide phenomenon.  As an industry, it may not have the history that it does in the US.  But, the professionals who work in it face many of the same challenges.

We turned to our correspondent, Bojan Kunovar, for insight into the profession in Eastern Europe.

The business valuation profession in Slovenia started to develop approximately 20 years ago, with the transformation from the socialist, state-planned into a market economy. The need for business appraisers thus first appeared when the state started privatizing state-owned companies. The first generation of business appraisers was born.

While privatizations fueled the first wave of business valuations, transactions followed quickly with companies being sold to domestic or foreign investors, merging or being taken over by managers. With the adoption of the new Slovenian Accounting Standards in 2001 eventually the need for appraisals for financial reporting purposes also arose.

In Slovenia the valuation profession is organized as a section under the umbrella of the Slovenian Institute of Auditing. The section represents three different disciplines of appraisers:

business valuation,
real estate valuation, and
valuation of machinery and equipment.

The valuation profession is regulated by the Law on Auditing, which defines the role of and criteria to become an appraiser, certified by the Slovenian Institute of Auditing. The Slovenian Institute of Auditing only grants the permission to work as a certified appraiser to those who complete an education program at the institute and meet criteria, set by the law, such as having at least 5 years of relevant work experience, having a university degree, etc. Once an appraiser obtains a license to practice she needs to renew it every two years, by meeting criteria related to a continuous education. At the moment there are 59 registered certified business appraisers, 54 real estate appraisers and 15 machinery and equipment appraisers.

Since 2003 Slovenia is a member of the International Valuation Standards Council (IVSC). As such, Slovenian appraisers must adhere to the International Valuation Standards. The rules of the profession are more clearly defined in the Hierarchy of Valuation Standards, published in 2004. And the work of appraisers is monitored and reviewed by the Slovenian Institute of Auditing.

Today business appraisers in Slovenia are mostly engaged to conduct appraisals in the following situations:

financial reporting purposes,
squeeze outs of minority shareholders,
tax purposes,
transactions (acquisitions / sales).

Litigation and divorce are not yet important revenue generators; partly because the volume of litigation and divorce is not that great, and partly because courts have their own appointed experts.

While it is generally not mandated by law to engage a business appraiser who has been certified by the Slovenian Institute of Auditing to conduct an appraisal, it definitely carries more weight with auditors, courts, tax authorities etc.  This is due to the high level of professional standards appraisers must observe, together with the fact that their work is monitored and sometimes inspected by the institute.

Methods used in business valuation assignments are quite up to date with the ones used in the USA. Competition, continuous education and annual lectures by prominent foreign guest speakers at the institute ensure that only the highest level of professional practice is appreciated and also – at least gradually so – accepted by clients.

Bojan Kunovar