Choosing an Appropriate Weighted Average Cost of Capital Definition Sometimes Depends On Context Valuation principles generally hold that the value of a business is largely a function of return on invested capital and growth, writes J. Richard Claywell, since these are the primary drivers of free cash flow. But how does this cash flow relate to the asset and liability values on the balance sheet? ...

Judge Cuts Apple Award Versus Samsung, Sets New Damages Trial  Poornima Gupta and Erin Smith report at Reuters report that Apple Inc had a major setback in its mobile patents battle with Samsung Electronics.  On Friday, March 1st, a federal judge slashed a $1.05 billion jury award by more than 40 percent and set a new trial to determine damages. Here's more:   ...

Statistical Confidence Can Help Pinpoint Value. Many questions have arisen concerning the reliability of valuations using the Direct Market Data Method (DMDM). Rand Curtiss shows how to use statistical techniques to answer them with confidence. ...

Why Estate Planners Need to Understand This Critical Valuation Element of a Buy Sell Agreement All businesses with more than one shareholder should have a current, well-written buy-sell agreement, asserts Mercer Capital. And for clients with valuation processes as part of their agreements, it is critical to understand "levels of value": Strategic Control Value, Financial Control Value, Marketable Minority V ...

Particularly When Valuing Companies with Substantial Foreign Operations, Business Valuation Analysts Know That Country-Specific Input Is Critical  David Foster at BVWire News reports that in additional to his general data update for 2013, Prof. Aswath Damodaran (NYU Stern School of Business) provides a list of country default spreads and risk premiums.  Here's the professor's assessment: ...

Investors Looked Favorably Upon Insurance Underwriters in 2012:  The Industry Index Did Better than the S&P.  Will Momentum Continue? Mercer Capital provides the insurance industry with corporate valuation, financial reporting, transaction advisory, and related services.   Download Mercer's Fourth Quarter 2012 summary here.  More: Investors looked favorably upon insurance underwriters in 2012, driving t ...

There Are All Kinds of Different Standards to Consider In Sophisticated Valuations. Here are Some Tips. Control premiums are difficult to calculate.  Why?  Because there are so many variables. You may need to adjust earnings to reflect a control value (i.e., restating owner’s compensation and adjusting discretionary expenses). But wait: There’s more!  There are minority earnings. And a variety of people to ...

Private Companies and Nonpublic Not-for-Profits are Exempted from a Particular Fair Value Disclosure as a Result of Recent FASB Amendment The Financial Accounting Standards Board responded quickly to concerns voiced in December to issue an amendment clarifying that private companies and nonpublic not-for-profits are exempted from a particular fair value disclosure.  Ken Tysiac at The Journal of Accountancy ...

Last Month’s Fiscal Cliff Legislation Included Lots of Tax Provisions. But Not Just for Individuals — There Are Tax-Saving Breaks for Businesses Too.  Here’s What You Need to Know. Bill Bischoff at The Wall Street Journal Small Business Blog reports that last month's fiscal cliff legislation included some important tax breaks for individuals; a longer version of his article appears at MarketWatch.  Here's t ...

Few Business Owners Seem to Even Know How to Make a Good Guess at What Their Business is Worth.  NY Times Introduces Technology to Help—and Certified Advisers Provide Extra Value.  Mark Cohen, at The New York Times Small Business Guide, reports:  "At 53, Joe Ritz is old enough to remember a time when many of the classic cars that now pull into his specialized repair shop were new. “It’s one field where it p ...

Aswath Damodaran, NYU's Legendary Valuation Expert, Recently Argues that there's a 90% Chance Apple is Undervalued.  Here's Why.   This comes in the wake of Apple shares' breathtaking plunge from recent highs. (That's be about $700 in September to $425 or so today.) In a new blog post, Sam Ro at Business Insider reports that Damodaran thinks that management can learn a few things from the recent market vola ...

A Valuation Principal Takes Issue With Revenue Ruling 59-60:  "Does Analysis of Macroeconomic Conditions Add Credibility to My Opinion of  Privately Owned Company Value In My Region?" Rick Warner, ASA, AVA, Principal, Great Lakes Valuations writes that "Most of us as appraisers are familiar with Revenue Ruling 59-60 and its prescription for factors to be considered as part of the valuation of the stock of c ...

At Issue:  Standard & Poor's Ratings of Mortgage Bonds Before the Financial Crisis  Jean Eaglesham, Jeannette Neumann, and Evan Perez report at the Wall Street Journal that S&P is under fire.  Here's more: ...

Accounting Isn't Just a Necessary Evil; Sometimes the Methods Can be Used as a Key Part of Your Business Strategy   Jeff Haden at Inc. answers a question from a reader who wonders if it matters what inventory accounting method she uses.   It does!  Here's some explanation, and specific advice:  ...

Tighter Regulations Leave Less Room for Error When Computing and Disclosing How Much Mortgages Cost.  John Adams at American Banker reports that Ernst Publishing, not related to the accounting company, sells technology and closing cost data to mortgage market players. Its clients include nine of the largest ten originators and servicers and the largest five title insurance companies.  And it has now receive ...

Still Fighting for its RTRP Program;  More Case Analysis and Industry Reaction Frank Byrt at Accounting Web reports what's happened in last two weeks since the U.S. District Court for the District of Columbia found the IRS lacked authority to regulate independent tax preparers.  Here's more: ...

Valuation Discounts, What the Interest Owners See, and What a Direct Owner Sees What sort of discounts apply to pass-through entities? Rand Curtiss helps clarify, looking at investment characteristics, investment profiles, and the interaction of these elements. He draws four conclusions. Find out what they are here. ...

The Tax Court Speaks Loudly and Firmly on the Responsibilities of Business Appraisers Hempstead & Co. has published "Estate of Gallagher is a Valuation Tutorial."  The article emphasizes the importance of providing the court with a clear and convincing explanation of the assumptions and arguments you have employed in carrying out a business appraisal. It discusses the recent Tax Court Memorandum opinion ...

Rule Will Require a Second Appraisal in Situations Where a Home is Being Flipped for a Quick, Higher Resale  A new rule passed Jan. 15 gives mortgage lenders an additional year to institute appraisal standards for higher-risk loans, Bloomberg reported, and Appraiser News Online highlighted.  The extension is one of the revisions that regulators made to the Dodd-Frank Act to address concerns from financial f ...

The FASB and IASB Don't Seem to Be Open to Reconsidering Basic Assumptions Behind the "Right-of-Use" Asset.  Here's Why They Should.  The attempt to find a single lease accounting model based on recognition of a right-of-use asset has faltered, assert two professionals in Grant Thornton LLP’s National Professional Standards Group.  In a new white paper, they suggest a control-based model as an alternative: ...