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. ...

In an enlightening article by McKinsey & Company, a compelling case is put forward for something you always felt was true, but couldn’t quite prove.  When it comes to marketing professional services or products, good old-fashioned email is much more effective than social media.  How much more effective is it?  The report states that email is so significant in generating new business that it’s 40 times m ...

Fannie Mae has officially launched a new website focused solely on appraiser quality monitoring.  The site is based on Fannie’s new appraisal review process, which was created to support data accuracy and consistency.  Through the site, lenders now have access to a list of appraisers whose reports are subject to a complete and thorough review by the agency, as well as those whose work is no longer accepted. ...

The next generation Pursuing an acquisition for the sake of improving the top line is risky.  A company can focus on creating value by reducing their cost of capital and thereby improving their risk profile.  Business valuation analysts are uniquely positioned to offer advice on risk and devise strategies for corporate clients to reduce risk exposure.  These measures usually lead to improved sales, profitab ...

Spinoff deemed an attempt to hinder and delay debtor’s creditors In December 2012, Tronox Inc. creditors concluded their case to recover at least $14 billion in damages from Anadarko Petroleum Corp’s Kerr-McGee unit over a spin off they claimed drove Tronox into bankruptcy. In 2006, Kerr-McGee spun off part of its business as Tronox before selling itself to Anadarko for $18.4 billion. Tronox, which was prev ...

In the “good old days" before the crash of 2008, Wells Fargo generated $100 billion in mortgage revenue every quarter.  Now, it makes barely half that.  As the largest US bank by market cap, it’s now seeking alternative business and product lines to fill that unfathomable financial gap.  Sources say that Wells Fargo is exploring the idea that the virtual currency, Bitcoin, might be the perfect revenue repla ...