How long will it last? Dividend recapitalizations provide a mechanism for owners, including private equity firms, to return capital to them (the investors) in lieu of an outright sale. The article discusses trends, the reasons for recapitalizing, and suggests what characteristics to look for when considering this technique. ...

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 ...

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.  I ...

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. ...

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. ...

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. ...

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. ...

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 detai ...

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 metho ...

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. ...

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.  ...

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 issue ...

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 d ...

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. ...

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 rest ...

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 ...

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. ...

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. ...

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. ...

  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 pu ...