Just because a corporate stock price is on the rise, is that justification enough for the huge payouts executives receive?  While shareholder returns are usually the most prominent factor considered by corporations when determining executive pay, many elite business school educators and industry experts don’t think they should be.  They contend that executives regularly profit off short-term bullish markets ...

In an article titled, “PCC to Ask FASB to Endorse First Private Company GAAP Exceptions”, under the subhead, “Business combinations”, the Journal of Accountancy reveals that the Private Company Council (PCC) approved a proposal to FASB that would allow a private company to elect to amortize goodwill acquired in a business combination on a straight line basis over 10 years or less. The proposal is conditiona ...

Uses of the Z-score in litigation and insolvency matters Dr. Edward Altman’s Z-score turned 45 years old this month. For the operations-focused valuation analyst, the Z-score is just as relevant today as it was when Dr. Altman introduced it in September 1968. The key to its enduring success is that it is based on fundamental financial ratios that represent value drivers, even in today’s changing market. ...

Updated guidance for taxpayers seeking equitable relief from section 66(c) or sec. 6015(f) of the Internal Revenue Code Revenue Procedure 2013-34 provides update guidance regarding the circumstances under which equitable relief will be granted. It supersedes Rev. Proc. 2003-61 and makes significant changes to when and how relief will be considered and granted. ...

Avoiding problems with an SMLLC This article reviews the benefits of considering the use of F-reorganization in mergers and acquisitions in addition to the more familiar disregarded entities (DEs) or single member limited liability company (SMLLC). F-reorganization can be used to overcome specific challenges, particularly as they relate to an SMLLC. ...

The Tax Court recently denied an IRS motion for summary judgment in an estate and gift tax case where an elderly mother made gifts to her daughters, while requiring them to pay all tax liabilities due if she happened to die within three years of making the gifts.  In the calculation for gift tax purposes, the mother reduced the value of the gifts by the estimated tax liability.  This reduction was denied by ...

Recently, the FASB issued exposure drafts of Accounting Standards Updates (ASUs) which propose reductions in the cost and complexity of accounting for intangible assets acquired by private companies, as well as subsequent testing for goodwill impairment.  The proposed changes in the drafts involve alterations to Accounting Standards Codification (ASC) Topic 85, Business Combinations, and Topic 350, Intanbig ...

A review of BVR’s Guide to Discounts for Lack of Marketability. If you are looking for a comprehensive source of information about the DLOM and the cases that business appraisers consider for confirmation of a method, look no further than BVR's Guide to Discounts for Lack of Marketability, Fifth Edition by John Stockdale, Sr. ...

It is far broader than forensic accounting While financial forensics may share some common ground with forensic accounting, these professions are far from identical twins. D. Larry Crumbley, CPA, MAFF lays out the differences between these often misunderstood professions and explores the academic factors that may be contributing to the confusion. ...

Agreements that work for both death and lifetime transfers Buy/sell agreements are absolutely critical to succession planning, but are too often neglected. Even when they are set up, they are generally structured to be funded by life insurance proceeds, in the event of death, rather than company cash flow. John H. Brown explains why this can be a big mistake and how certified valuation analysts (CVAs) are i ...

The standard 10 stages to use in an intangible asset engagement In this second installment, Robert F. Reilly completes his review of the 10 typical stages of any intangible asset analysis engagement. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stage ...

The American Institute of Certified Public Accountants (AICPA) reports that in less than five years, 75 percent of all CPAs will be at or very near retirement age. Naturally, there’s an undercurrent of panic in the profession. Small and midsize firm owners are reluctant to sell to large operations, not to mention the pain of watching what they’ve spent a lifetime to create simply disappear. There’s also the ...

In 2011, after a six-year pilot program, the IRS made the Compliance Assurance Process (CAP) a permanent fixture. The intention was to give large corporate taxpayers a pre-filing period where discrepancies or contentious issues could be ironed out to simplify examination after filing. The goal was to provide each side with more confidence in the contents at the time it was officially filed. The problem: CAP ...

The standard 10 stages In this first half of his two-part series, Robert F. Reilly summarizes six of the ten typical stages of any intangible asset analysis assignment. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, ...

How we define tangible and intangible assets is paramount to accuracy and fairness in valuation. In this article, Dr. Carl Sheeler, responds to a September 9, 2013 concept paper authored by Rick Baumgardner, Chair of the Appraisal Practices Board of the Appraisal Foundation, titled “Valuation Issues in Separating Tangible and Intangible Assets.” ...

A rough ride This article examines recent state legislation in Georgia that requires entertainment production companies and their payroll providers to withhold state income tax on payments made to loan-out companies as a prerequisite to claiming tax credits. Peter Stathopoulos examines the difficult transition involved with this legislation that may spawn similar proposals in other states that host a large ...

Financially-sound companies can more easily obtain lines of credit at low interest rates, as well as more easily issue debt financing or issue bonds on better terms. Companies often take advantage of loopholes to present themselves as more profitable than they are. Most do it in a way that they’re not technically breaking the law, but ethics certainly come into question. When should you be concerned and whe ...

Things change because markets are not logical; markets are emotional. In an analysis featured on CNNMoney.com, Ben Horowitz lays out the specific challenges of raising capital and valuing startups in the current economic climate. In an eye-opening comparison, he looks at the price/earnings ratios (P/E) of all S&P 500 IT companies for the last 18 years. With this wide of a time span, one might expect som ...

Nothing simple about interest The takeaway from current research and practice within the forensic financial analyst profession is to stay current on methodology and to conduct your analysis in such a manner that can be explained and defended. ...

An alternate business valuation report format This article briefly describes an alternate format for business valuation (BV) reports that can make them more understandable. ...