The AICPA has published a comprehensive overview in The Tax Advisor that examines IRS oversight of CPAs who provide valuation services. Special emphasis is placed on Sec. 6695A, which imposes large penalties for substantial valuation misstatements, and the reason the IRS has increased its involvement in appraisal issues. The IRS Appraisal Review Process is examined, as well as specific actions that may be taken by the Office of Professional Responsibility against an appraiser and the related firm for standards violations. Highly-detailed and with new information, you can read the full overview at the website of the AICPA. [button link=”http://www.aicpa.org/Publications/TaxAdviser/2013/November/Pages/gregory_nov2013.aspx#fn_2″ color=”silver”]…
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In Friedberg v. Commissioner, the Tax Court rejected the claim by the IRS that the appraisal submitted by the taxpayer was not qualified because it wasn’t reliable, and improperly applied the methodology to value a property. In the Tax Court’s ruling, it stated that the appraisal was “qualified” as defined in Treasury Regulation 1.170A-13(c)(3) and rejected the IRS’s attempt to disqualify the appraiser. In a deposition, the appraiser admitted that he had never valued certain development rights that were part of his valuation of the easement. The IRS presented this information as evidence to discredit the appraiser, but the Tax…
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A different perspective on profit and performance Balanced benchmarking provides a mechanism by which to assess and manage business branches and units. It also provides a unique insight as to the available paths to improve productivity and complements other analytical tools. The combined effect is that its use provides insight into best practices and ways to improve productivity.
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More on the neutral business valuator and the mediation process This article, by one of the top national leaders in the mediation profession, discusses the importance of having reliable facts to expedite the settlement of conflicts where the value of a business is a key factor.
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Increased Scrutiny for ESOP Fiduciaries This article presents a case for higher scrutiny for ESOPs as well as their fiduciaries. By juxtaposing protocol with proverbs from Aesop’s fables, valuable lessons are learned for business and life.
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Reality TV offers more than entertainment Reality turnaround TV shows provide valuators lessons that go a long way toward improving their consulting and valuation skills, and client deliverable. Those lessons could result in more opportunities and greater credibility.
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In a letter to the FASB and IASB, the AICPA’s Financial Reporting Executive Committee (FinREC) suggested that a dividing line be created between Type A and Type B leases that deviates from the rule the boards have proposed. While FinREC supported the objectives calling for transparency and recognition on-balance sheet for all leases, it disagreed with the test for how leases would be classified. For details on the discrepancies in the lease classification process, visit the full story at the Journal of Accountancy. View [button link=”p://journalofaccountancy.com/News/20138910.htm” color=”silver”] Read Full Article[/button]
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In a brief but revealing article by the Wall Street Journal, auditors at the seven largest accounting firms in the U.S. were cited for deficiencies found in 37.5 percent of the audits inspected by regulators. The vast majority of the deficiencies involved evaluation of the market prices companies supplied for complex assets. Citations were also made for failure to test managers’ assertions about the methods and data used to value assets. [button link=”http://blogs.wsj.com/cfo/2013/10/01/auditors-at-big-firms-cited-for-more-deficiencies/” color=”silver”] Read Full Article [/button]
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Healthcare consulting in an era of reform Part 2 In Part 1 of this article, the impact of healthcare reform on the opportunities for healthcare consulting was discussed. In Part 2, methods utilized by healthcare consultants, as well as the phases of a typical healthcare consulting engagement, are discussed.
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Getting ready for your day in court Part 1 of Preparing for Expert Witness Testimony was published in QuickRead in August 2013. The article dealt primarily with the importance of effective engagement letters and information gathering in the expert witness preparation process. It would behoove readers to revisit Part 1 to receive the full value of the expert witness process.
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Wandry v. Commissioner In certain cases, formula-driven, gift-giving plans have proved to be successful. In other cases, they have not. What characteristics differentiate a formula gift-giving plan that can withstand the Internal Revenue Service (the “service”) scrutiny and be upheld in Tax Court from a plan that gets defeated? The Wandry decision1 provides insight into these questions and highlights issues that taxpayers and tax advisers should consider when structuring and implementing a gift-giving plan. This discussion summarizes: (1) the facts of the Wandry case; (2) the service’s arguments; and (3) the Tax Court decision.
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Summary and Solutions Morningstar announced in September 2013 it will discontinue publishing the SBBI Valuation Yearbook, but that it will continue to publish the Ibbotson SBBI Classic Yearbook. James Harrington, who was previously director of business valuation research in Morningstar’s Financial Communications Business, provides a summary of which data is being discontinued and continued, along with a discussion of alternative data sources in light of the recent announcement.
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How would you value a three-year old video game company that only has two games on the market and just 130 employees? Apparently, the answer is $3 billion. How does a valuation come up with this kind of number and more importantly, can it even be accurate? Check out this Forbes.com profile of the deal between Japanese internet giant, Softbank, mobile online gamer, Gungho and the hot property, Supercell. [button link=”http://www.forbes.com/sites/joshuakennedy/2013/10/17/how-do-you-value-a-three-year-old-company-with-a-100-year-ambition/” color=”silver”] View Full Article[/button]
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According to the Wall Street Journal, now would be a good time to sell a business. When examining the small-business-for-sale market, transactions are up significantly from this time last year. In 2012, there were 1,189 small businesses sold between July and September, while 2013 has surpassed that total with 1,685. The upswing in sales has been mostly in service companies, followed by retailers and restaurants. For more specs on the ideal business to sell right now, you can read the full story here. [button link=”http://online.wsj.com/news/articles/SB10001424052702304682504579153573588055100?tesla=y” color=”silver”] View Full Article[/button]
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In defense of the Discounted Cash Flow Method Richard R. Conn challenges criticism of the Discounted Cash Flow Approach and premise that the Market Approach is superior to an Income-Based Approach, even when there is more just superficial observations. The author proposes that “ it is important to realize that the circumstances in which the DCF Method indicates a different value than the market price should be very rare and unique. If the legal community is finding a multitude of expert valuation opinions where the DCF conclusions are at odds with the market evidence, then those litigators have a valid…
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Patent damages require thorough analysis and attention to detail This federal case update highlights patent cases where reports or testimony from damages experts were excluded and affirmed. Regardless of outcome, these cases have a similar theme; it appears that some damage experts should perform a more thorough analysis and pay more attention to detail than they currently do.
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Benefits and rules to successfully mediate claims Mediation is a process that can be employed pre- and post-litigation to settle claims. A successful mediation requires upfront work and effort, as well as good faith and settlement authority. The selection of a mediator is also critical. This article provides an overview of the practices employed to successfully settle claims.
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Beyond an all-or-nothing approach This overview examines the circumstances under which S corporations may or may not be tax affected. Particular emphasis is placed on family law engagements, which do not always involve a consistently defined standard of value, which creates much confusion for valuation analysts.
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In case you missed it, the Professional Standards and Guidance Committee (PSGC) of the Appraisal Institute (AI) submitted its official comments to the Appraisal Standards Board of The Appraisal Foundation regarding feedback to drafting changes to the 2016-2017 USPAP. In its candid response, AI says USPAP has a “mixed record” when it comes to addressing appraiser behavior in a way that establishes public trust with the profession. Also at issue is the USPAP definition of “bias” with AI favoring a more specific, two-part definition and test of bias. When asked if USPAP is too complex, the response also lays…
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Because of increased IRS audit procedures, multi-national corporations face great risk when it comes to transfer pricing from both a compliance and tax planning perspective. The familiar multi-nationals like Amazon or Microsoft have made headlines regarding transfer pricing disputes and adjustments that run into the billions. In an excellent article by the Journal of Accountancy, small, closely-held companies are not immune to such risks, especially when they venture into overseas expansion. Here, you’ll find a great overview of transfer pricing issues from a financial reporting and tax perspective. [button link=”http://www.journalofaccountancy.com/issues/2013/oct/20137721″ color=”silver”] View Full Article[/button]