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 ...

The Expert’s Role The article offers the comments of one expert on how the courts (judges) could improve the end process. ...

Since 2008, policymakers have kept interest rates at or near zero. All this cheap money was intended to heal the wounds of the financial crisis and encourage business owners to invest in and grow their businesses. Although this approach has helped a bit, business valuations tend to be running at higher than usual rates. AVC.com has reviewed recent data and determined whether this is a business valuation bub ...

Understanding the nature and risk of expected cash flow This discussion summarizes the interrelatedness of the weighted average cost of capital and the weighted average return on assets within the context of a purchase price allocation for financial reporting purposes. Failure to understand this fundamental relationship can lead to inaccurate estimates of value for the acquired assets and, therefore, inaccu ...

The impact of hoarded cash in valuations The impact on business valuators in this economic and political climate is largely observational. Observational because any forecasted financial information installed in any formula must include the impact of managements’ sources and uses of “hoarded cash.” ...

The Appraisal Standards Board (ASB) has released the Second Exposure Draft for proposed changes to the 2016-2017 Uniform Standards for Professional Appraisal Practice (USPAP). The scheduled revisions include: Defining the term “report” Edits to eliminate confusion regarding report drafts Revisions to Standard 3 to enhance consistency with other standards and clarify dates identified and reported Edits to el ...