Fairness opinions are offered by financial advisors, primarily, investment bankers on behalf of the Board of Directors who rely on them when considering a significant corporate event. The fairness opinion says that the impending transaction is fair from a financial point of view of the subject company’s stakeholders. As Jeff K. Davis, Managing Director of Mercer Capital’s Financial Institutions Group, explains, because most of the investment banker’s fee is contingent upon the successful closing of a transaction, the lead banker’s opinion has always had some taint. In 2007, the Financial Industry Regulatory Authority (“FINRA”) issued Rule 2290, which requires the…
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An increasing number of industry pricing experts are advising CPA firms to consider replacing their billable hour pricing with a fixed pricing or value pricing model. Author and consultant Ron Baker and the Journal of Accountancy have a question and answer session to discuss the conversations that firms must have in order to implement value pricing. They talk about questions CPAs should ask during the conversation, the parties that need to be involved, both internally and externally, when conversations should take place, and more. For more information on implementing the value pricing model, read this article, part of a three…
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The Securities and Exchange Commission recently issued Regulation A+ that amends the existing exemption from registration requirements for smaller issues of securities. This ruling creates a two-tiered offering structure that will solve many of the limitations of Regulation A. Madeline L. Harrigan, a financial analyst with Mercer Capital, says the updated Regulation A+ provides a greater annual dollar limit without the “costly entanglement in the web of state blue sky regulation” for larger sums of capital. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/regulation-a-raising-the-capital-cap-for-small-companies/” target=”_blank” font=”arial” align=”left”]For more information on Regulation A+, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It…
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Democrats and Republicans in the House are divided on the issue of repealing the estate tax. Republican says this tax is unfair to people who must pay taxes as they accumulate wealth through the years. Democrats want to expand the tax, hitting more estates with a higher top rate. Bernie Becker discusses these issues in The Hill and explains the House is divided. [button color=”blue” link=”http://thehill.com/policy/finance/238862-both-parties-fired-up-over-vote-on-estate-tax-repeal” target=”_blank” font=”arial” align=”left”]For more suggestions on ways to discuss fees with clients, click here.[/button] Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net
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Advisors often ask how they should defend their fees when working with small clients who contribute the least revenue to the firm. Beverly Flaxington, a practice management consultant, suggests firms use a tier approach that classifies clients and outlines services and fees provided at each level. Remind clients during consultations of the services and values provided by your firm. [button color=”blue” link=”http://www.advisorperspectives.com/newsletters15/How_to_Defend_Your_Fees.php” target=”_blank” font=”arial” align=”left”]For more suggestions on ways to discuss fees with clients, click here.[/button]
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Privately held companies can expect the level of scrutiny over equity compensation-related valuation to increase with the size of the equity compensation grant. Getting the valuation process right the first time for equity compensation grant compliance is always the least expensive route says Sujan Rajbhandary, vice president, and senior member of Mercer Capital’s Financial Reporting Valuation Group. In this article, he discusses the impact of the Auditor Review, SEC Scrutiny, and IRS Review on the valuation process. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/valuation-equity-compensation-grants/” target=”_blank” font=”arial” align=”left”]To learn more about the valuation for equity compensation, click here.[/button] This article is republished from Mercer Capital’s…
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Companies often use contingent consideration when structuring M&A transactions to bridge differing perceptions of value between a buyer and seller, to share risk related to uncertainty of future events, to create an incentive for sellers who will remain active in the business post-acquisition, and other reasons says Lucas M. Parris, a senior member of Mercer Capital’s Financial Reporting Valuation Group. In this article, he discusses the requirements of ASC 805, fair value, and the complexity of the procedures necessary to estimate future payment. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/valuation-contingent-consideration/” target=”_blank” font=”arial” align=”left”]To learn more about the valuation of contingent consideration, click here.[/button] This…
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There are clear signs that the “easy” portfolio valuations that have existed in 2013 and 2014 may be coming to an end in 2015. Travis W. Harms who leads Mercer Capital’s Financial Reporting Valuation Group, discusses the expansion in multiples and their role in the favorable equity market returns over the past two years. He also discusses the impact of high-yield credit spreads, the energy sector, and loan covenants on credit valuations. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/if-valuation-were-an-olympic-sport/” target=”_blank” font=”arial” align=”left”]To learn more about equity and credit valuation, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted…
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Two provisions of the affordable care act—the premium tax credit and the individual shared-responsibility payment (the individual mandate)—are complex and making it extra challenging for both taxpayers and preparers filing individual tax returns for 2014. Early on this tax season, the IRS discovered some errors, complications, and adversities for some individuals and provided relief says Annette Nellen, tax professor and director of the MST Program at San José State University. In her article, she summarizes the health care act guidance and relief issued in early 2015 and notes health care updates relevant for 2015 and beyond. [button color=”blue” link=”http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2015/Tax/update-on-affordable-care-act.jsp” target=”_blank” font=”arial” align=”left”]To learn…
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M&A activity has accelerated substantially in 2014 following the financial crisis. When an acquisition proposal is being weighed, there needs to be a thorough vetting of the buyer’s shares. A fairness opinion evaluates the investment merits of the shares before and after a transaction is consummated says Jeff K. Davis, CFA with Mercer Capital. This article discusses the key questions you need to ask about the buyer’s shares. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/fairness-opinions-evaluating-buyers-shares/” target=”_blank” font=”arial” align=”left”]To learn more about fairness opinions, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the…
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A Chapter 11 reorganization is a chaotic and challenging time for a distressed company says Samantha L. Albert, a senior financial analyst with Mercer Capital. There are many valuation-related considerations that management teams and financial advisers need to have knowledge of. This article discusses five key concepts to focus on when proceeding with a Chapter 11 reorganization. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/5-things-know-chapter-11-bankruptcy-valuation/” target=”_blank” font=”arial” align=”left”]To learn more about Chapter 11 Bankruptcy and Valuation, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit http://mercercapital.com/category/financialreportingblog/.
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Big data offers unlimited potential to change the way business is done, for almost any type of company says Arleen Thomas, Senior Vice President of Management Accounting, at the AICPA. Management accountants can use the ever-growing amount of data to make decisions that will increase the competitive advantage of clients’ businesses. This article discusses not only the sources of data available to the finance professional but also how it impacts companies of every size. [button color=”blue” link=”http://blog.aicpa.org/2015/02/big-data-big-opportunities.html#sthash.NC2caTSv.FdFzO28x.dpbs” target=”_blank” font=”arial” align=”left”]To learn more about big data, click here. [/button] Image courtesy of nokhoog_buchachong/FreeDigitalPhotos.net
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Discounted Cash Flow (DCF) valuation is simple at its core, yet often intimidates many says Aswath Damodaran, Professor of Finance at the Stern School of Business at New York University. You need one only theory to value companies that is based on the equation that the value of an asset is the value of the expected cash flows over its lifetime, adjusted for risk and the time value of money. To learn how to strip away the layers of complexity built into valuation over the decades and return to this simple equation, click the link below. [button color=”blue” link=”http://www.wallstreetoasis.com/blog/discounted-cashflow-valuations-dcf-academic-exercise-sales-pitch-or-investor-tool” target=”_blank”…
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Particular challenges can arise in goodwill impairment valuation and accounting when a company acquires a business located in another country. When goodwill accounting standards are strictly applied, under U.S. GAAP or IFRS, the differences between write-offs taken in one country versus another should be minimal. This article delves into some of the notable differences in goodwill impairment conclusions worldwide. Greg Forsythe, CFA, ASA, director at Deloitte Financial Advisory Services LLP discusses methods to minimize these differences. To learn more about the minimizing goodwill impairment differences globally, click here. Image courtesy of Apple’s Eyes Studio/FreeDigitalPhotos.net
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Phone fraud tops this year’s list of the biggest IRS tax scams of 2015, states Sally P. Schreiber, JD, senior editor of Journal of Accountancy, followed by phishing, identity theft, return preparer fraud, and hiding income offshore, rounding out the top five scams. The article delves into the many schemes, including suspicious e-mails, detecting identity theft, refund fraud, fake charities, and more, and includes details on identifying each of the dozen scams that will assist in providing taxpayer protection. To learn more about the top tax scams of 2015, click here. Image courtesy of Stuart Miles/FreeDigitalPhotos.net
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Corporations globally are faced with the complex problem of corruption, states Ravi Venkatesan in “Confronting Corruption” in McKinsey Quarterly. It takes many forms, and perpetrators are skilled in developing new ways to be corrupt and cover their tracks. In corporations, there are multiple types of corruption, including bribes, extortion, speed money, and employee fraud. The first steps into anti-corruption can be daunting and policies, controls, and culture together must be considered to fight and resolve the problem. To read the full article, click here.
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A Note on ESOP Valuation[1] One of the most critical issues regarding valuation is the concept of adequate consideration. The ESOP trustee cannot pay more than “adequate consideration” for the stock it purchases.[2] In the context of an ESOP, ERISA defines adequate consideration as the stock’s “fair market value…as determined in good faith by the trustee…”[3] The proposed Department of Labor regulations define “fair market value” as the “price at which [the stock] would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under…
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Business valuation (BV) liability claims are not as frequent compared to other litigation risks faced by practitioners. On the other hand, there are BV-related liability claims that exist, especially in cases where a valuation report was used to guide financial decisions by businesses, lending services, regulatory agencies, and others, according to Frank Vinluan, in the January 21 issue of FVS News. One of the best ways valuators can reduce their risk of a lawsuit starts with the engagement letter. Engagement letters can help limit a valuator’s exposure by clearly establishing the expectations of work to be performed, the purpose…
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Because of stock market volatility, taxpayers may want to convert to Roth individual retirement accounts. Taxpayers, after converting to the Roth, have until October 15 to undo it, as long as the conversion is set up correctly, says Robert Keebler, partner, Keebler & Associates LLP, in The Ultimate Estate Planner Blog. Image courtesy of Stuart Miles/FreeDigitalPhotos.net
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The American Institute of Certified Public Accountants (AICPA) has sent a letter urging Rep. Paul Ryan (R–Wis.), the new chair of the House Ways and Means Committee, to follow the AICPA’s principles of good tax policy to guide tax reform. The letter comes in response to the Tax Reform Act of 2014, a draft proposal put forth by the former Ways and Means chair Dave Camp (R–Mich.). The AICPA’s letter addresses 22 major items pertaining to the proposal, including income tax rate reform, employment tax modification, the repeal of the alternative minimum tax, plus taxpayer protections. To learn more about…