The impact on shareholder value Knowing the value of a business and delivering real value to a client company entails far more than using EBITDA multiples or going along with a rule of thumb to keep the peace. As professionals, valuators must be far more rigorous in their engagements, and focus on delivering value. The obligation to identify, measure, manage, and mitigate the risks are their responsibility. ...

  Now that we’re six years into the Great Recession, financial experts tell us that the stock market is booming, and the economy is once again robust. Strangely, the vast majority of Americans aren’t sharing in this so-called recovery and the benefits of it are virtually non-existent, unless you look at the top 0.1% of wage-earners in the country, namely the CEOs of major corporations. Profitability an ...

What This Means for Appraisers In a new twist involving litigation that impacts valuation analysts, on June 11, 2014, the Fifth Circuit Court of Appeals upheld the Tax Court’s valuation of a historic preservation façade conservation easement, but vacated the Tax Court’s imposition of a gross undervaluation penalty. The latest ruling, as Joe Brophy explains, raises a host of new issues. ...

  In spite of the current economic climate, a recent survey from the American Institute of CPAs (AICPA) showed that 54 percent of valuation professionals expected a 10 to 50 percent increase in the demand for their services over the next two to five years. These results are part of the 2014 AICPA Survey on International Trends in Forensic and Valuation Services. Forensic experts were even more optimist ...

Know your data! Understanding the data that is applied in an analysis is important. Data that relies on standard industrial classification (SIC) codes can be misleading for industries that have changed—or did not exist—in 1987. As business models and industries evolve, it pays, as Bob Bridges explains in this article, to do a closer analysis. ...

The valuation of customer relationships can be somewhat of a gray area for valuators. In many cases, the common valuation methodologies don’t apply, and the professional neglects to consider whether the determined value is consistent with a market participant’s perspective. While it’s become routine to assume customer relationships are a primary asset, this is not the case across all industries. In a short, ...

Calculation engagements require development standards A proper calculation engagement requires planning, mutually agreed upon procedures, and adherence to professional standards. Otherwise, the valuation analyst and firm risk damaging their good name and reputation. ...

Reconciling compliance with multi-agency valuation standards While standards exist to uphold the integrity of business valuation, multi-credentialed professionals can face a daunting task when trying to compare and comply with all guidelines across the spectrum of issuing agencies. This article seeks to root out possible conflicts and create clarity among standards so valuators may perform with less effort ...

  According to a recent article in The Appraisal Journal, industry sales among the 616,098 restaurants in the U.S. totaled $425.6 billion in 2012. Chain restaurants make up nearly 45% of the industry population in the U.S., and at a growth rate of 2.2% are expected to overtake independent establishments by 2023. Between 2010 and 2012, 22,000 restaurants were sold for a total of almost $11 billion. The ...

When the usual approaches won’t work Technology and innovation expert and professor, Tim Swift, proposes an alternative to the traditional Market, Income, and Cost approaches to valuing a patent portfolio. ...

Deviations for biased cash flows Cash flows vary, and traditional approaches need to take into consideration the downside or cessation probability; otherwise, the value of the entity is overstated. Setting the probabilities of "downside" and "cessation" risk drives the appraiser's efforts in adjusting for biased cash flows. This article presents an approach that can be used to adjust the cash flow. ...

  In case you missed it, Z. Christopher Mercer, ASA, CFA, ABAR, founder and CEO of Mercer Capital, was the keynote speaker at the American Academy of Matrimonial Lawyers (AAML) and the American Institute of CPAs (AICPA) 2014 bi-annual joint conference this year. His presentation concerned The Five Really Big Valuation Issues. They included: 1.) discount rates, 2.) control premiums and minority interest ...

Think like an investor, not an accountant! If fair market value is to determine investor expectations and equity risk; then why do these factors receive limited or no consideration when opining on the level of impairments (investor concessions) ubiquitously referred to ask discounts? This article addresses the business risks associated with asset-holding companies' equity that should be considered and repor ...

Ways to prevent costly misunderstandings One of the most important documents valuation, forensics, and litigation support experts produce is the engagement letter. Just as you painstakingly explain what your firm plans to do, it’s also imperative to explain what the client needs to do. ...

  Reimbursements from insurers, made to healthcare facilities for the care they administer, are an essential part of the valuation of hospitals, clinics, outpatient care centers and other facilities. As if that exchange wasn’t complicated enough, it’s about to go through another transition that very well may impact the valuation of all healthcare institutions. According to a new white paper released by ...

  Do shareholders and boards have a reason to be concerned when a CEO separates or gets divorced? This is the question being asked in a fascinating white paper titled, Separation Anxiety: The impact of divorce on shareholders by David F. Larcker, Allan L. McCall and Brian Tayar of Stanford University Graduate Business School. The paper is part of the Rock Center for Corporate Governance at Stanford Uni ...

Breaking down invisible value Read Part 1 here. This overview is the second half of Robert Reilly’s series that examines the types of intellectual property analyses, different standards of value that may apply in valuation as well as the alternative types of intellectual property ownership interests and the alternative terms of intellectual property ownership interests. Finally, it offers a discussion regar ...

Intellectual Property Valuation Principles—Part 1 This article examines the types of intellectual property analyses, different standards of value that may apply in valuation as well as the alternative types of intellectual property ownership interests and the alternative terms of intellectual property ownership interests. ...

  More than a decade in the making, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have released a converged standard on revenue recognition. Titled, “Revenue from Contracts with Customers”, the standard is designed to enhance the process of revenue reporting and improve comparability in financial statements among corporations using IFRS and U.S. ...

  Barely six months into 2014, General Motors (GM) has recalled more vehicles than it sold in the five years since it filed for bankruptcy. In February alone, 2.6 million vehicles were recalled for an ignition problem that’s been attributed to at least 13 deaths. Even so, the GM stock price has remained completely neutral since April. How is the stock valuation immune to such a corporate and public rel ...