Pharmaceutical companies that have remained among the world’s top 20 largest have all gone through a megamerger with a $10+ billion target company between 1995 and 2005. That sounds like good news, and it is—for the shareholders. On the flipside, such gargantuan couplings tend to wreak havoc on internal management systems, as well as organizational and critical programs; even research and development suffer ...

Know your state licensing laws! This article examines an important issue that is only now coming to light in cases being litigated: namely, whether professionals also need an investigator license. There is no absolute answer, and professionals—especially forensic accountants and fraud examiners—are advised to read this article. ...

The days of applying Mandelbaum and referencing a few IPO and restricted stock studies are over. This article addresses what is often omitted from most asset holding entity valuation reports. By failing to include issues like the ones outlined, the resulting adjustments are less empirical and more a "guesstimate". Valuation practitioners and their advisory clients have a duty to the users of our reports to ...

FASB has voted to endorse a GAAP alternative to exempt private company lessees from a requirement to consolidate variable interest entities (VIE) in common control leasing arrangements.  Initiated by the Private Company Council (PCC), the exemption would be allowed under specific conditions including: Private company lessee and the lessor entity are under common control Private company holds a leasing arran ...

Currently, 20 states and the District of Columbia allow some type of legal marijuana use.  On January 1st of this year, supply shops all across Colorado began selling to the general public (age 21 and over), in accordance with a voter referendum.  Medicinal use bills have been filed or are expected to be introduced in eight additional states, while full legalization bills like that of Colorado have been fil ...

It’s not as simple as it seems This article explores the fact that the valuation of a simple debt instrument, such as a promissory note, can be anything but simple. It is observed that the sum of unpaid debt, as well as accrued interest, may well overstate the value of the promissory note. Also covered is whether assets tied to notes need to be valued separately. ...

Four things valuators should know about medical claims and coding While all valuators need to be able to cite specific factors considered in the determination of fair market value, many times the measures selected could be applied to a variety of industries. In this first of a two-part series, Jeffry Moffatt examines why revenue is most often a primary area of interest for valuation, because without revenue ...

While CPAs and tax attorneys must currently meet professional standards for tax preparation and other services, a recent decision by the U.S. Court of Appeals for the District of Columbia has ruled that the IRS has no authority to force continuing education or similar standards on tax preparers.  The case stems from a 2011 IRS proposal of a system that would have established tax preparer registration and re ...

According to a recent report from the Office of the Inspector General (OIG) with the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac continue to fail to properly analyze data collected from the Uniform Collateral Data Portal (UCDP) and take considerable risks when purchasing and guaranteeing single-family residential mortgages.  The report charged both Freddie and Fannie with not consideri ...

If you use a company's internally developed projections when developing a discounted cash flow estimate of value, what are the real risks? This article offers a practical guide to using a company's budget and plan for utilizing future projections in a discounted cash flow calculation. ...

Are there hidden risks to the valuator? The best defense against liability is a good offense. As Joseph Petrucelli explains in this article, a good starting point to ensure the appropriate level of professional skepticism and due professional care is maintained in engagements is asking the question: “What would a reasonable person think about my judgment?” ...

New from Duff & Phelps: 2014 Valuation Handbook—Guide to Cost of Capital Plus: Cost of Capital Analyzer by ValuSource Both Available through NACVA and ValuSource Salt Lake City, UT—February 19, 2014 Duff & Phelps has announced it will provide the data previously published in Morningstar's Ibbotson® SBBI® Valuation Yearbook in its new publication, the 2014 Valuation Handbook—Guide to Cost of Capital, ...

The Journal of Accountancy is reporting that the SEC’s strategic plan for 2014-2018 contains an initiative that involves reviewing whether a “single set of high-quality global accounting standards is achievable”.  While not specifically mentioning the International Financial Reporting Standards (IFRS) the location in the 39-page document where the initiative appears also states that the consideration is par ...

In a Q&A by Inc.com, former Vice President of Finance for Yahoo, Dennis Morgan, discusses the most important points of handling an acquisition, based on his $5 billion worth of deals while with the internet giant.  In the article, Morgan discuss why deals go wrong, how to close the gap with a proper operating plan, where deals fall through on the operations level, the need for a strategic roadmap and th ...

A summary of recent federal court cases involving gross misstatement of valuation. This month’s federal court case summaries feature seven cases that highlight the recent U.S. Supreme Court decision involving gross misstatement of valuation. In addition, the summary features cases that delineate the consequences to valuation professionals who fail to comply with Tax Court pre-trial orders under Tax Ct. R. 9 ...

Separability and transferability are key This overview examines intangible assets within business combinations through the lens of FAS 141. Fair value is covered as well as identification and classification protocols. ...

While real estate investment trusts (REITS) have strengthened their credit profiles in the last few years, Fitch Ratings is anticipating a decline in their positive rating for 2014.  According to Fitch, the upgrade/downgrade ratio for U.S. REITS has remained at 10:1 since 2011 and that most have now completed their deleveraging techniques.  As a result, representatives for Fitch expressed that “credit metri ...

In an optimistic prediction from Reuters, middle market M&A activity should carry lots of opportunities throughout 2014.  The positive outlook comes after a combination of more certainty with respect to Fed tapering and fewer concerns about government stalemates.  The prediction also relies heavily on the observation that companies previously focused on cost savings have begun to shift their attention t ...

Accuracy is everything This article provides an overview of the significance of regression analysis in business valuations, with a particular emphasis when applying the Market Approach. The theory is presented as to why regression analysis is superior to ratio analysis. ...

Has the Securities and Exchange Commission given M&A business brokers the “green light” to engage in securities transactions? The Securities and Exchange Commission (SEC) issued a January 31, 2014, No-Action Letter indicating it would not take enforcement action against an M&A broker contemplating a securities transaction. ...