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. Access to the list, which is updated monthly, is gained through the Technology Manager portion of Fannie’s website and is available to sellers and service providers alike. The monitoring site arises, in…
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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 replacement source. Now under consideration is how Bitcoin-related services or banking arrangements might be offered to virtual currency entrepreneurs. For more information on this unique turn of events, visit zerohedge.com. [button color=”blue” link=”http://www.zerohedge.com/news/2014-01-14/wells-fargo-americas-largest-bank-market-cap-pushing-offer-bitcoin-services”…
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In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed. According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed. This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”. Interestingly, economic uncertainty and a lack of capital were far less influential than they had been in years past. If there is plenty of cash available, then why are so many deals failing to close? Ilan Mochari shares the answers…
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In a well-supported article by zerohedge.com, the author suggests a “fix” to the current problems with price-to-earnings (P/E) multiples. Among the questions answered are: Can P/Es tell us anything about stock valuations during periods of earning recessions? Is a bear market closer than we think? If so, when is the best time to buy? What do today’s inflated valuations mean for long-term returns? Why are outcomes so different when earnings are adjusted to account for mean reversion? The philosophy and figures are more than interesting when examined across a nearly 100-year sample, as this review does. You can read the…
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In a brief, but telling article from Inc.com, Jeremy Quittner cites statistics from the November 2013 Janus Monthly Equity Report that suggests the tech and social media industries may be heading for a burst of 1990’s proportions. This is due largely to the outrageously enormous public debuts of companies like Facebook and most recently, Twitter. The stratospheric valuations only become more unrealistic when considering these are companies that do not create or manufacture any tangible good or service. By and large, they don’t produce anything. The report itself warns, “…cloud computing and social media are bringing a level of disruption…
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Income from intellectual property continues to be an increasing contributor to economic growth. Too often, however, the creator and financial advisor find themselves in a gray area when it comes to the changing tax laws surrounding patents and copyrights. Proper planning and a clear understanding of the most recent developments are essential when it comes to affecting the creator’s tax liability. In a thorough article from the AICPA’s The Tax Advisor, some of the most important issues regarding intellectual property and income are addressed, including: royalties as business and non-business income, appropriate deductions, exemptions from uniform capitalization rules, sale or…
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New technologies are emerging in the market to fast, that we barely acquaint ourselves with one before two more burst onto the scene. Not all of these advancements will impact our world or even still be around a decade from now. The ones that do last, however, will transform the economy and our lives in significant ways. In an extremely informative and interactive report by McKinsey & Company titled, Disruptive Technologies: Advances that will transform life, business and the global economy, twelve technologies are singled out as the most significant, with a projected $33 trillion yearly impact on global markets…
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More often than not, a company’s income statement isn’t a definitive disclosure of its revenue and expenses that investors can interpret clearly, easily and accurately. This is largely because income and expenses, as classified under GAAP, can be difficult to define. According to McKinsey & Company, savvy investors often have to reengineer statements to come up with figures that they’re even remotely comfortable with to use as a starting point in valuing future performance. In a well-written and straight forward article, McKinsey & Company explains the trouble with GAAP-based income statements and offers their “modest” proposal for revisions that…
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Everyone knows that in a merger or acquisition deal, time is not a friend. The longer transfer negotiations drag on without an agreement, the less likely a deal is going to be signed. This is mostly because over time, both parties are more likely to adopt adversarial positions. When things slow down, firms begin to assume the successor isn’t making the transaction a priority and may not the right candidate for their offer. Do they even have the capacity to handle such a venture? With each contract revision, the involved parties continue to reread the documents, often finding new problems…
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In an interesting interview with the Risk & Compliance Journal, David Hoffman, forensic accountant and managing director at Acuitas, Inc. discusses the status of the lawsuits that resulted from the bank failures that occurred in the years following the economic crisis of 2008. At the close of 2013, there were 81 lawsuits involving 127 different banks. Hoffman discusses his role as a forensic investigator in the proceedings, drawing similarities between the current situation and the S&L crisis of the 1980’s. He also shares his view of how current regulations impact his responsibilities within the investigative process and the part technology…
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Beginning this year, the PCAOB is making it a priority to examine whether or not firms that offer non-audit service lines are compromising the quality and accuracy of their audit services by doing so. In yet-to-be-scheduled roundtable discussions with audit firm leaders, regulators are expected to delve into the potential implications for such consulting arrangements. According to PCAOB chairman, James Doty, the review will focus on: 1.) how firms avoid having their best talent work in consulting at the expense of audit expertise and competence 2.) the risks associated with non-audit business lines 3.) how non-audit activities affect resource allocation…
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In an opinion piece for The New York Times, M.I.T economics professor, Michael Greenstone, examines the parallels between Enron, the corporate accounting scandals of the early 2000’s and the sub-prime mortgage crisis/Great Recession of present day. Greenstone points out that the biggest similarity and ethical hurdle in both scenarios is the fact that auditors were hired and paid for by the very firms they were being asked to audit. Naturally, this created an enormous conflict of interest on the part of the auditors to present truthful findings, while at the same time, feeling the pressure to please their clients. Although…
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The U.S. Supreme court recently upheld the 40 percent penalty in gross valuation misstatement when the partnerships involved were determined to be shams with no economic substance and as such, the partners’ outside basis in the partnership was zero. The unanimous decision, written by Justice Scalia, resolved a split among the circuit courts as to whether the penalty applied. The Fifth Circuit Court, where the case originated, and the Ninth Circuit held that the penalty did not apply when the transaction had been disregarded on the grounds of economic substance. The ruling also settled a disagreement among the courts as…
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With the explosion of new social media platforms over the last five to seven years, a dilemma has arisen for business owners in search of new customers or clients. Is the standard company website obsolete? Should businesses be reaching out to potential prospects through platforms like Twitter and Pinterest? With Facebook standing at 500 million accounts, many companies are abandoning their standalone websites in lieu of a page on the social media giant’s site, but is this actually good for business? In an interesting article for Search Engine Watch, Rebecca Murtagh explains how social media is best used as a…
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With the number of retirements in the accounting profession expected to soar over the next decade, many foresee a wave of CPA firm sales happening at the same time. Anticipating the trend, the Journal of Accountancy has offered up its method of valuing a CPA firm, but the method and results differ depending on whether an external transaction or internal transfer is involved. Of particular concern is the sale or transfer of the retiring CPA’s ownership interest. You can get the full breakdown on both approaches regarding each scenario here. [button color=”blue” link=”http://www.journalofaccountancy.com/Issues/2013/Nov/20138232.htm” font=”arial” textcolor=”000″ align=”left”]View Full Article[/button]
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BlackBerry’s patent portfolio is one of the most diverse in the technology industry and is possibly the company’s most valuable asset. Sifting through its thousands of patents reveals a host of innovations in all areas of mobile technology, ranging from user interfaces to battery efficiency and data compression. Some 80 per cent of BlackBerry’s patents are the result of the company’s own research efforts. [button color=”white” link=”http://www.theglobeandmail.com/report-on-business/value-of-blackberrys-patents-at-mercy-of-changing-technology/article14508039/” target=”_blank” font=”arial” align=”left”]View Full Article[/button]
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According to data presented by McKinsey & Company and reported by Bloomberg.com, up to 20 percent of the world’s largest banks may be broken up or merge as part of a correction strategy to boost shareholder returns. As banks refine their focus on products and regions, the number of global, universal banks may drop from 25 to less than 10. In 2012, global banks earned an 8.6 percent return on equity, which was up from the previous year, but still below the 10-12 percent average. Last year, U.S. banks earned an 8 percent average return, while European lenders received 2…
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While the idea of beating the market is more suited to the financial investment sector, McKinsey & Company recently applied some of the same principles to business strategy. In a review of 3,000 large nonfinancial companies, this overview examines the players that avoid profit depletion and maximize value creation, even during economic downturns. Tried and true business practices are tested as the numbers stack up. The results reveal what it takes to win consistently, regardless of market fluctuations. Interestingly, the report draws a parallel between the social class system and the corporate class system, what it takes to breakout and…
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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 taken by the Office of Professional Responsibility against an appraiser and the related firm for standards violations. Highly-detailed and with new information, you can read the full overview at the website of the AICPA. [button link=”http://www.aicpa.org/Publications/TaxAdviser/2013/November/Pages/gregory_nov2013.aspx#fn_2″ color=”silver”]…
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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. In a deposition, the appraiser admitted that he had never valued certain development rights that were part of his valuation of the easement. The IRS presented this information as evidence to discredit the appraiser, but the Tax…