We all need to get everyday work stuff done. Often though, doing the everyday work stuff leaves little time to get the big work stuff done. Stuff that can make a huge difference in your practice (and your life). In this article, the author describes six rules he follows to get those important matters done. We all need to get everyday work stuff done. Often though, doing the everyday work stuff leaves little time to get the big work stuff done. Stuff that can make a huge difference in your practice (and your life). Stuff that can make those valuation…
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A Shake-up in the Evolution of the Healthcare Industry? As covered in a May 2021, NACVA QuickRead article, special purpose acquisition companies (SPACs) began tremendous growth in 2020 and looked to be a new mainstream avenue of investing. Two years later, the growth of SPACs across all industries, including healthcare, has plateaued and appears to be dropping in some industries. This article will examine how SPACs grew to their 2021 height in popularity and their future in a post-COVID-19 world. As covered in a May 2021, NACVA QuickRead article, special purpose acquisition companies (SPACs) began tremendous growth in 2020 and…
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in Inventory Loss Claims Insurance claims for loss of inventory are generally examined by insurance carriers. The carrier will retain a forensic accountant who has the ability to quantify out of sight inventory losses. Out of sight inventory losses occur when the accountant is not able to physically count the damaged inventory. These types of inventory losses include, but are not limited to, damage from fires, floods, and theft. This paper focuses on the two significant, but different, roles forensic accountants play in quantifying the inventory loss and how—in the normal course of the analysis—they may find instances of fraud…
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Experts Beware… Financial experts that handle construction defects claims should be familiar with the doctrine of economic waste, the potential limitations on a damages claim, and recognize the potential of this doctrine arising in a damages engagement. The author shares how this doctrine may arise and what to look for before accepting a damages engagement. “Economic waste is the label that courts have adopted as justification for not awarding an aggrieved party the cost of performance as damages for breach of a construction contract”.[1] This topic generally arises when a repair in a construction defect matter requires significant reconstruction or,…
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When All You Have is the Price for Many (Patents) It is rare for all patents included in portfolio license or sale agreements to have equal value. In a patent infringement case, the individual values of the patents are needed. So, when only a small subset of patents are at issue, how can we estimate their worth? This article provides insight as to how value can be adduced. It is rare for all patents included in portfolio license or sale agreements to have equal value. When only a small subset of patents are at issue, how can we estimate their…
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Through Pop Culture References It often takes more time and skill to explain something simply and shortly and less time to use a lot of words, spreadsheets, and technical jargon. Nevertheless, pop cultural references can be used to quickly crystalize issues because many people are familiar with them and their underlying meaning. This article identifies some pop cultural references that can be used to help resolve or explain valuation disputes. Introduction “If you can’t explain it simply, you don’t understand it well enough.” This statement may appear to be a paradox, like another famous Introduction “If you can’t explain it…
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For Business Valuations Accounting Standards Codification (ASC) Topic 842: Leases is the lease accounting standard published by the Financial Accounting Standards Board, which replaces prior guidance from ASC Topic 840. ASC 842 brings previously off-balance sheet operating leases onto a company’s balance sheet. The new standard takes effect for private companies in fiscal years starting after December 15, 2021, and represents a fundamental change to financial statements, which are the foundation of business valuation analyses. This article will focus on potential impacts to a valuation analysis because of the change in accounting standards. Accounting Standards Codification (ASC) Topic 842: Leases…
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At a Deposition or Court Hearing To begin to understand the subject, we must point out that the “Reglas de Evidencia de Puerto Rico” (the Puerto Rico Rules of Evidence) and the Federal Rules of Evidence adopted in the district of Puerto Rico—which is part of the Second Circuit Court of Appeals—allow for expert testimony to be inserted into the “record” of a case in a deposition or in a court hearing, are basically the same. This article covers the significance of the Daubert standard and provides a summary of rules to temper the expert that does not feel constrained…
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This article builds on the author’s May 11, 2022 “Being Different is More Profitable Than Being Better” article. In this article, the author provides five questions that my enable one to differentiate oneself from the competition. How do your clients think you’re doing? You don’t know unless you ask. Because knowing what they want and then giving it to them is the easiest (if not the best) way to stand out. This week’s topic builds on my last QR article Being Different is More Profitable Than Being Better. Towards the end of that article, there were some suggested questions we…
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How to Avoid Them! A 409A valuation refers to a method of determining the value of a company’s common stock. In other words, the 409A valuation is a method of calculating fair market value (FMV) according to the regulations under the Internal Revenue Code (IRC). This valuation can be carried out using various types of valuation methodologies, however, it is important to avoid pitfalls in 409A valuation when carrying out the valuation to obtain a more accurate result. In this article, we will discuss some of the most common mistakes that can be made when carrying out a 409A valuation,…
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Two Major Approaches Adopted by Courts Assessing Claims This article discusses the challenges that COVID-19 and other recent catastrophes present when calculating business interruption claims. It surveys the two common approaches adopted by courts, examines their outsized impact on an insured’s recovery, and discusses how the influx of new decisions will change the business interruption landscape. It also analyzes how the underwriting process is evolving to account for the economic impact of these recent disasters. Courts across the globe are flooded with business interruption insurance claims arising out of the COVID-19 pandemic, extreme weather events, cyberattacks, and other catastrophes. COVID-19…
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End of Life or Another Day at the Office? One of the most concerning communications for experts to receive from a hiring attorney is the opposing attorney has filed a Daubert motion to exclude their opinion. Going through a Daubert challenge is stressful for even experienced experts. This article will discuss the Daubert decision and its impact on experts. It will also address questions considered by courts regarding an expert and their work. Finally, the author will discuss his experience with Daubert challenges, the process, and working with the hiring attorney in defending the expert’s opinions. One of the most…
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in Detecting Fraud in Business Interruption Claims (Part II of II) Business interruption claims are generally closely scrutinized by insurance carriers and can range from thousands of dollars, to claims exceeding $100 million. Insurance carriers often seek the assistance of either internal or external forensic accountants to analyze such claims. During their analysis, forensic accountants often detect the possibility of fraud in a claim, prompting further investigation by the carrier. This second part presents a business interruption case example that illustrates how to analyze business interruption fraud claims and explains the considerations by insurance carriers when hiring external accountants. Read…
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Getting to the Finish Line is Exhausting In this article, the author analogizes the sale of a business to how one prepares and runs a half marathon. Many business owners may treat an exit as a half marathon, but that is a mistake. Business owners need professional consultants to assist them with their exit plan and negotiations. The author shares his views on the negotiation process and stresses that business owners must prepare and expect changes to successfully conclude a sale. 2021 was a record year for business sale/exit transactions in the lower-middle market (businesses with valuations between $10 million…
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in Detecting Fraud in Business Interruption Claims (Part I of II) Business interruption claims are generally closely scrutinized by insurance carriers and can range from thousands of dollars to claims exceeding $100 million. Insurance carriers often seek the assistance of either internal or external forensic accountants to analyze such claims. During their analysis, forensic accountants often detect the possibility of fraud in a claim, prompting further investigation by the carrier. This two-part article details the role forensic accountants play in identifying and analyzing fraud in business interruption claims and explains the considerations by insurance carriers when hiring external accountants. Introduction…
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A Guide for Forensic Analysts As cryptocurrencies become more mainstream, it is vital for forensic analysts to understand and analyze digital currency data. Forensic analysts are increasingly being brought in to trace and help recover crypto assets in criminal matters, such as money laundering and other fraud prosecutions. There is also a noticeable increase in the use of forensic analysts in civil litigations, which can range from contested divorces to probate and bankruptcy cases. This article focuses on how to trace and recover crypto assets using one of the major exchanges as the example. Coinbase is an online cryptocurrency exchange…
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May 2022 For more than 400 years, the limited liability protection of corporate entities has been perhaps one of the greatest accelerators of economic growth and capital formation in the industrialized world. Despite the benefits, corporations have also been used as vehicles to cheat creditors with bad guys hiding behind the “corporate veil.” Over time, courts have developed a strategy for creditors to “pierce the corporate veil” to satisfy their claims from the personal assets of malicious shareholders, but until recently, creditors have been unable to pursue recovery against other affiliated entities. For more than 400 years, the limited liability…
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Signs of Ethical Deterioration The 21st century has brought not only the worst pandemic in over 100 years, but also an alarming deterioration in ethical culture. We see examples of this in the types of fraud being perpetrated, as well as in the behavior of elected officials, athletes, business owners, and wealthy parents of students. Where is this trend headed, and can it be reversed? In this article, the authors discuss how perpetrators rationalize, how financial fraud is concealed, and ways to combat fraudulent behavior. The 21st century has brought not only the worst pandemic in over 100 years, but…
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There are two ways to set ourselves apart from the competition—be different or be better. Being different is more effective, but it takes some effort to demonstrate how we are different. Being better is less effective, but it takes almost no effort to draft the usual platitudes. The author shares his views on the respective choices and rewards. There are two ways to set ourselves apart from the competition: be different or be better. Being different is more effective, but it takes some effort to demonstrate how we are different. Being better is less effective, but it takes almost no…
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A Claim That is Not Just for Corporations Many taxpayers are familiar with the Internal Revenue Code Section 165 worthless stock deduction. Taxpayers often call on valuation analysts to analyze and document the worthlessness of the stock of a corporate subsidiary or of some other common stock equity interest. The Section 165 loss deduction also applies to the worthlessness of a partnership interest, limited liability membership interest, or similar equity interest. Many taxpayers may not be aware that the taxpayer does not need to abandon the worthless security interest to claim the loss deduction. This article summarizes the requirements applied…