Moving Forward when Valuing Asset-Intensive Operating Companies In this article, Heidi Walker, the author, revisits the Tax Court and Ninth Circuit’s unpublished decision in Estate of Giustina and the Supplemental Memorandum Opinion issued by the U.S. Tax Court this past year. ...

ANAV Method Illustrative Example This discussion is the final installment of a series related to the asset-based business valuation approach. The prior discussion described the theory and methodology of the adjusted net asset value (ANAV) method. This final discussion presents an illustrative example of the application of the ANAV method. ...

In the Crosshairs of Regulators In this article, Mark Zyla of Acuitas discusses trends in fair value measurements in financial reporting and enforcement actions. Mr. Zyla notes that financial reporting is increasingly scrutinized by regulators. He observes that recent inspection reports of accounting firms that audit publicly traded entities by the Public Company Accounting Oversight Board (PCAOB) have indi ...

The Adjusted Net Asset Value Method This discussion is the fifth part in a series regarding the asset-based business valuation approach. Previous discussions described the theory and application of the Asset-based Approach. And, previous discussions described the theory and application of the asset accumulation (AA) method. This discussion describes the theory and application of the adjusted net asset value ...

Hotel Business Value QuickRead’s Technical Editor, Roberto Castro, reviews BVR’s What It’s Worth: Hotel Business Value.  There are few resources available for business valuation professionals that focus on the valuation of hotels.  The “go to” reference books have been Stephen Rushmore, MAI and Erich Baum’s Hotels & Motels: Valuations and Market Studies, a 2001 Appraisal Institute publication, and David ...

Asset Accumulation Illustrative Example The previous discussion in this series, part III, described the typical methodology and application of the asset accumulation (AA) method of the asset-based business valuation approach. This discussion presents an illustrative example of an AA method business valuation analysis. ...

Asset Accumulation Method This discussion is the third part of a series. Previous discussions introduced the theoretical concepts and the practical applications of the asset-based business valuation approach. This discussion describes one common Asset-based Approach valuation method: the asset accumulation (AA) method. ...

Common Analyst Misconceptions The first article in this series provided an introduction to valuation analysts (analyst) regarding the need to integrate and use the Asset-based Approach to value going-concern businesses and securities. This second installment addresses common analyst misconceptions regarding the use of the Asset-based Approach to value both asset holding companies and operating companies. ...

Introduction Valuation analysts are retained to value closely held businesses, business ownership interest, and securities for a variety of transaction, financing, taxation, accounting, litigation, and planning purposes. For each engagement, analysts consider the three generally accepted business valuation approaches: the Income Approach, the Market Approach, and the Asset-based Approach. However, most anal ...

A Critique of the Ibbotson Methodology In this paper, the author argues that the Size Premium in Excess of CAPM (and other similar size premium measures) should not be used by valuation practitioners because: a) it is inconsistent with the empirical evidence; b) it is constructed using a method that is inconsistent with how practitioners estimate their CAPM cost of equity; and c) it does not properly calcul ...

Part II of II This is the second of a two-part article. In this second part, Edward Mendlowitz illustrates how stocks can be acquired and what factors to consider when developing or modifying a stock portfolio. Read Part I here. ...

Use of Benninga-Sarig to Estimate Debt Betas in a Valuation Engagement In the July 8, 2016 In re Appraisal of DFC Global Corp. Opinion (DFC Opinion), the Court of Chancery of the State of Delaware suggested that debt betas should be estimated for individual companies and it cited Pratt and Grabowski’s Cost of Capital as a source for debt betas based on the firm’s credit rating. In addition, the Court also a ...

Part I of II Everyone knows there is a stock market and cannot help but hear daily updates—whether they understand it or not. Here are some basic principles and terminology that can help clients better understand the stock market and their investment decisions. ...

Aligning Business Models and Business Practices A key factor in establishing a reasonable transfer price is establishing the business model used by sales and distribution organizations. In this article, the authors describe the three primary models and their relevance establishing and defending a transfer price. ...

Audit Risk and Use of Defined Value Clauses Estate planning attorneys and their clients are aware of the risk of an audit. Despite knowing this risk, they seek certainty. Business valuation is as much art, as it is science. Estate planning attorneys have devised techniques to hedge the aforementioned risk and provide their clients with a greater degree of certainty. One such technique utilized by estate pla ...

Brewery Value QuickRead’s Technical Editor, Roberto Castro, reviews BVRs What It’s Worth: Brewery Value.  This is a market niche that is highly regulated, segmented, and one where new business models are cropping up. ...

About the Use of Monte Carlo Simulation QuickRead’s Technical Editor, Roberto Castro, explains that Monte Carlo is another tool valuation and litigation support professionals should embrace since courts have signaled its approval. ...

Winery Value QuickRead’s Technical Editor, Roberto Castro, reviews BVR’s What It’s Worth: Winery Value ...

NACVA Present at the Congressional Hearings on the Proposed Regulations In 2015, the IRS issued proposed section 2704 regulations. The proposal would severely impact valuations of family held businesses that are the subject of gifts. On December 1, 2016, hearings were held in Congress regarding the impact of the proposed regulations. NACVA members, Peter Agrapides, Robert Grossman, and Mark Hanson testified ...

Value and Business Challenges in the Budding Cannabis Industry QuickRead’s Technical Editor, Roberto Castro, reviews BVR’s What It’s Worth: Value and Business Challenges in the Budding Cannabis Industry. ...