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The National Association of Certified Valuators and Analysts® (NACVA®) has been educating and credentialing CPAs and other financial advisors to support business owners in understanding the value of their business for the past quarter century. NACVA’s  global Certified Valuation Analyst® (CVA®) designation is the most widely recognized valuation credential and the only business valuation credential accredited by the National Commission for Certifying Agencies® (NCCA®).

Valuation Considerations Related to Equity Incentive Compensation Plans

Consider the Tax Consequences of Stock Awards, Stock Option Awards, and Partnership Profits Interests This discussion summarizes what analysts need to know about the taxation issues and the security valuation issues related to private company equity incentive compensation programs. It focuses on both the taxation aspects and the valuation aspects of implementing an equity incentive compensation plan at a pr ...

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Unimpeachably Unauthoritative Authority

Citation Omitted What makes the world of expert witness services so daunting at times is the fact that so much goes unsaid, untaught, or undefined. For example, the most recent international glossary used by valuation and appraisal professionals across the globe does not define what a conclusion or opinion is. Since saying the silent part out loud seems to be the popular thing to do, this tenth article of t ...

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Incorporating Country Risk Premium Differentials

Into the Market-Based Valuation (Part II of II) This is the second of the two-part article regarding country risk. In this second part, the author discusses how to incorporate the risk into multiples. Read Part I here. Incorporating Country Risk into Multiples Having found the value of the country risk premium required, we can proceed with incorporating it into the market-based valuation. It is worth mentio ...

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Analyst’s Noncompete Agreement Considerations in Corporate Acquisitions

Part II of II This is the second of a two-part article (Read Part I here) that focuses on the situation where the target company is a private corporation, and the sellers are employee/shareholders. This discussion summarizes the taxation and valuation considerations related to a transaction where employee/shareholders are selling the private C corporation stock to a C corporation acquirer. Some of the taxat ...

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Incorporating Country Risk Premium Differentials

Into the Market-Based Valuation (Part I of II) This is a two-part article on how to incorporate country risk premium. The market-based approach to valuation is commonly used by market practitioners and is based on the relevant values and multiples from similar assets. One of the differentiators between assets is the country risk related to the operations, when the multiples are collected from various countr ...

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Analyst’s Noncompete Agreement Considerations in Corporate Acquisitions

(Part I of II) This is a two-part article that focuses on the situation where the target company is a private corporation, and the sellers are employee/shareholders. This discussion summarizes the taxation and valuation considerations related to a transaction where employee/shareholders are selling the private C corporation stock to a C corporation acquirer. Some of the taxation and valuation considerations ...

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More About Musings on Markets

The Consequences When there is a Mismatch Between the CEO’s Strategy and the Lifecycle the Company is Operating In On December 10, 2021, Aswath Damodaran published a blog titled Musing on Markets. In this blog he asked what makes for a “great CEO”? What happens when there is a mismatch between the lifecycle the company operates in and the strategy pursued by the CEO? He then answered these questions based ( ...

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Imagining a World with a (Mostly) GAAP-Based Income Tax

Part II of II This is the second of a two-part article (read Part I) related to the proposed (mostly) GAAP-based income tax in the (perhaps fatally wounded) Build Back Better Act. While the Build Back Better Act may be dead, the GAAP-based income tax is a polarizing concept that may be resurrected soon. The first part focused on why there is a push by some—and pushback by others—on such a tax. The second pa ...

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Imagining a World with A (Mostly) GAAP-Based Income Tax

Part I of II This is the first of a two-part article related to the proposed (mostly) GAAP-based income tax in the (perhaps fatally wounded) Build Back Better Act. While the Build Back Better Act may be dead, the GAAP-based income tax is a polarizing concept that may be resurrected soon. The first part focuses on why there is a push by some—and pushback by others—on such a tax. The second part imagines some ...

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Hitchner Webinar: How to Attack and Defend Databases Used by Valuation Analysts

How (Use of) the Unknown Will Kill You On November 17, 2021, Jim Hitchner presented “How to Attack and Defend the Databases Used by Valuation Analysts”. The presentation raised the following questions: Have you ever been cross-examined by an attorney who is more familiar than you with databases referenced in the valuation report? When was the last time, if ever, that you reviewed and studied the methodology ...

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Intellectual Property Valuations

Analysts Caveats and Reporting Guidelines (Part V of V) This fifth and final installment presents valuation analyst caveats and reporting best practices related to the intellectual property valuation. Intellectual Property Valuations: The Relief from Royalty Method (Part I of V) Intellectual Property Valuations: Elements of the Valuation Analysis (Part II of V) Intellectual Property Valuations: Application ...

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Intellectual Property Valuations

Illustrative Example of the Relief from Royalty Method (Part IV of V) Previous installments of this five-part discussion summarized the development of the market approach and the relief from royalty (RFR) method of intellectual property valuation. This fourth installment presents an illustrative example of the practical application of the RFR method. [su_pullquote align="right"] Intellectual Property Valuat ...

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Intellectual Property Valuations

Application of the Relief from Royalty Method (Part III of V) This is the third article of a five-part series on valuation of intellectual property describing the application of the RFR method. Intellectual Property Valuations: The Relief from Royalty Method (Part I of V) Intellectual Property Valuations: Elements of the Valuation Analysis (Part II of V) Introduction This five-part discussion focuses on the ...

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A Tribute to Dr. Shannon P. Pratt

Anecdotes from James R. Hitcher of Moments Spent with Dr. Shannon P. Pratt, a Pioneer in the Business Valuation Industry This discourse shares the author’s long, rewarding relationship with Dr. Shannon P. Pratt, an icon in business valuation (BV). He lived and breathed BV. Outside of his career, he had an intense love of life and liked to have fun. The author, James R. Hitchner, shares what he learned from ...

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Intellectual Property Valuations

Elements of the Valuation Analysis (Part II of V) This second article of the five-part series on Intellectual Property Valuations summarizes the typical elements of the intellectual property valuation analysis. This part of the discussion focuses on benchmarking and the use of research databases. [su_pullquote align="right"]Resources:Intellectual Property Valuations: The Relief from Royalty Method (Part I o ...

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Intellectual Property Valuations

The Relief From Royalty Method (Part I of V) This is the first article of a five-part series that focuses on what valuation analysts and owner/operators need to know about one category of intangible property: intellectual property. There are generally accepted cost approach, market approach, and income approach methods that may be used to value intellectual property. This discussion focuses on the applicati ...

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Shannon Pratt’s Valuing a Business

Preserving a Legacy In this article, Roger J. Grabowski, FASA, shares with readers a personal story regarding his friendship. The forthcoming 6th edition is a tribute to Dr. Pratt, a close friend and leader of the profession. [su_pullquote align="right"]Tribute to Shannon Pratt[/su_pullquote] Introduction I am fortunate to have co-authored several books with Shannon. While I had gotten to know Shannon throu ...

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S Corporation Valuations

Avoiding the Chaos and Selecting the Proper Methodology Over the past 20 years, business valuation analysts (and the courts) have debated whether there is an S corporation premium vis-à-vis the C corporation. This debate has led to the profusion of models and confusion. Four predominant models currently in use include: the Fannon, Delaware MRI, Van Vleet’s SEAM, and Treharne Model. Each of these models make ...

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Cost Approach to Intellectual Property Valuation

Part IV: Illustrative Examples Part I of this series discussed the conceptual foundations of the cost approach to intellectual property valuation. Part II described the generally accepted valuation methods within the cost approach to intellectual property valuation. Part III presented the practical measurement procedures in the application of the cost approach. In this final installment of this series, Part ...

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The Cash vs. Hybrid vs. Accrual Conundrum

What to Ask for and Use? Most small businesses use the cash basis of accounting. Despite that practice, prospective clients will prepare their books in a variety of different ways that do not conform with the accounting cash basis. There are hybrid and accrual cash basis and the business valuation practitioner needs to recognize the differences between these forms of accounting. In this article, the author ...

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