IP Valuation—Beyond the Income and Cost Approach Valuation analysts (“analysts”) are often asked to value debtor company intellectual property (IP) within a business bankruptcy context. Some of the bankruptcy reasons to value IP include the assessment of the following: the debtor’s solvency, a secured creditor’s collateral and protection, the fairness of a Section 363 IP asset sale or license, the debtor’s rejection of its IP licenses (and the implications of that rejection on the IP licensees) under Bankruptcy Code Section 365(n), and the reasonableness of a plan of reorganization. Many analysts immediately think of applying income approach or cost approach…
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Disclose Now or Later? There is no requirement to attach an appraisal for an estate of gift tax return, but having been involved with the classification of returns at the Cincinnati Service Center located across the river in Covington, Kentucky, I want to share my thoughts on when it is appropriate to attach an appraisal done for gift and estate tax purposes.
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With the New Year just around the corner, Mercer Capital is beginning their countdown a little early. Here are this year’s 10 most popular posts from The Financial Reporting Blog. Happy New Year 2016! To read the full article in Mercer Capital’s Financial Reporting Blog, click: Financial Reporting Blog: Best of 2015. 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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The IRS is Challenging the Appropriateness of Discounts when Preparing a Valuation The current regulations, Revenue-Ruling 93-12, allow for discounts when valuing a Family Limited Partnership (FLP). The proposal is expected to potentially limit the allowed discount and consequently raise the taxable portion of the trust or estate structures. This article reviews the current requirements for FLPs, their history, and the potential exposure to FLP’s in the near future.
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Duff & Phelps has released its 2015 U.S. Goodwill Impairment Study. This is prepared in partnership with the Financial Executives Research Foundation, analyzing the general and industry trends of goodwill impairment of over 8,700 U.S. publicly-traded companies. To download your complimentary copy, click: Goodwill Impairment Study 2015.
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Buyers do not offer premiums simply for the sake of gaining control, but rather, through exercising the prerogatives of control, those buyers expect to generate economic benefits. Travis W. Hams, leads Mercer Capital’s Financial Reporting Valuation Group, looks at the Appraisal Foundation’s white paper on the subject of JAB Holdings’ acquisition of Keurig Green Mountain. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: Single-Serve Control Premium? 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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How to Account for Current or Proposed Legislation in the Business Valuation Engagement Oftentimes a valuation engagement presents a unique set of challenges for the appraiser. For instance, a particular engagement may be the first look at how companies in a particular industry operate. Other times, it may be a look at a company experiencing a downturn, and the appraiser must determine how to properly determine its value, so as not to overemphasize the downturn, while not overvaluing the company at the particular date of valuation. Other times, particular engagements present the issue of how to adequately account for current…
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on Business Valuations in Litigation In this article, Paul Fullerman, CPA, CVA, discusses techniques which can assist the accredited valuation professionals performing a business valuation.
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SPARC the Analysis and Shine Have you ever asked your clients what drives the value of their businesses? If they feel comfortable that they know what drives their business’ value, have you ever asked them why it does? In this article, first of a two part series, Sarah von Helfenstein shares her thoughts on the kinds of things that we, as business analysts and appraisers, should consider when assessing business value.
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Being on the rise, dissenting actions are catching the eye of investors, attorneys, and other deal makers. Jay D. Wilson, Jr., senior member of Mercer Capital’s Depository Institutions practice, takes a look at why it is important an appraiser preparing a valuation of a bank in an appraisal action understand both valuation techniques and the banking industry. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: Dissenting Shareholders and Bank Appraisals: Speak Now or Forever Hold Your Peace This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with…
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Guidance from Bross Trucking v. Commissioner (2014) Valuation analysts often have to separate company-owned entity goodwill from shareholder-owned personal goodwill in the valuation of closely held companies. These valuations may be performed for family law, shareholder dispute, breach of contract, or other litigation purposes; for transaction structuring and sale consideration allocation purposes; and for gift tax, estate tax, or income tax purposes.
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There seems to be an imbalance between the public and private markets. Holding private capital markets more desirable than public markets expresses and illiquidity preference. Madeleine L. Harrigan, financial analyst with Mercer Capital, notes this is at odds with basic investment logic and the requirements of portfolio management and why it cannot continue. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: Are IPOs the New Down Round? 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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Your Next Engagement Currency has played a central role in most business valuation and financial forensic engagements since the origination of the two terms. What has not been so clear lately is the changing nature of currency and for that matter, the very definition of money itself. This article explores how digital currencies originated, their attributes, and how they should be considered for your next valuation or forensic engagement.
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Meet Your Advisory Team Selling a business is a one-time process for most owners. It is also a harrowing process involving professionals in many disciplines. Here is a description of the primary people assisting in the process.
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Obviously, every equity compensation plan is different and the particular tax treatment of a given security depends on the facts and circumstances of the arrangement. Samantha L. Albert, senior financial analyst with Mercer Capital, examines equity-based compensation and the tools available when examining these arrangements. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: The IRS Equity Compensation Audit Guide. 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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Why the Change from “Fraudulent Transfer” to “Voidable Transaction” May be a Big Deal The Uniform Fraudulent Transfer Act (UFTA) was recently amended and renamed; it is now called the Uniform Voidable Transactions Act (UVTA). “The renaming has no substantive effect whatever. Yet, it reflects an important truth about the act that merits discussion.” This article shows how changes in semantics can potentially lead to changes in how so-called fraudulent transfer lawsuits are addressed by practitioners and the courts.
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Use of Synthetic Credit Ratings to Determine the Appropriate Market Yield for the Preferred Equity Interest Among the estate tax planning methods that include grants of “carried” or profit interests, grantor retained annuity trusts, outright gifts, etc., entity freeze is a less known, or perhaps, less utilized tool. Yet, in certain circumstances, a freeze entity can be a compelling wealth transfer mechanism. This article presents an overview of a freeze entity structure, its economics, and a valuation framework specific to freeze entities. The article also offers an example of how practitioners can deal with an important element of the freeze…
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For Current Market Conditions How can one adjust the cost of capital to reflect current market conditions? Does inclusion of the βSIZE and SPH/ERPH result in double counting? In this article, Marc Vianello answers these questions.
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Background and Objectives of the Job Aid (Part 3 of 3) In the third article of this three part series, the author discusses the remaining portions of the Job Aid, specifically, the Discussion and Analysis Section of the Job Aid which addresses: Evidence-Based Valuation Analysis, Theory-Based Valuation Analysis, and Weighting of Factors and Approaches and shares his views on the value and limits of this document. Read Part 1 and Part 2.
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When Performing a Business Valuation Earnings are not always objective and valuations apply a multiple to earnings to determine a company’s value. The elements making up a company’s valuation involve determining normalized earnings, a decision whether income taxes would be applied, and the capitalization rate to be used to get the value. There are also other factors, but this article looks at the quality of earnings.