So why do we, as appraisers, differ from judges when it comes to subsequent events? Traditionally, valuation and litigation support professionals only consider facts known or knowable as of the valuation date, yet courts will look at subsequent events. This article examines how a valuation and litigation support professional may address subsequent events.
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Equity funds now able to engage in mass advertising In just a few days, the ban that prevents private equity funds from marketing directly to the public will be lifted. A recent review by Michelle Park of Crain’s Cleveland Business examines what this might mean for various private equity and venture capital funds and their future customers.
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In a recent presentation to donors and alumni, University of Louisville president and economist, Dr. James Ramsey gave what most thought would be a gloom and doom “state of the university” address. While government funding and support from the State of Kentucky are certainly in decline, Ramsey’s presentation was surprisingly upbeat. Freshmen test scores were up dramatically. The graduation rate was stronger than ever, and the research budget had quintupled since 1998. As if that weren’t enough good news, the university was recently invited to join the Atlantic Coast Conference, and the football team scored a victory in the Sugar…
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With the kickoff of the new football season, Forbes has once again, released its much anticipated valuation list of Most Valuable NFL Teams. How the numbers stack up gives a very interesting view inside the most valuable professional sports league on earth. According to the Forbes data as reported by Pressboxonline.com, the average NFL team increased in value by 5 percent. Interestingly, winning the Super Bowl only adds about an additional 1 percent to a team’s value. This is largely due to the operating structure of the NFL, the variance of national revenues and the sometimes limited revenue from local…
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Giving holders of concentrated risk in public company stock a tax break This article establishes there is recognition by the IRS and the courts that a well-supported proof of impairment based on the sale of a large number of shares necessitates an investor concession. It provides the rationale and methodology to capture the existence and the level of impairment.
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Do the missing months mask the true financial performance? In a recent study entitled, “Orphans Deserve Attention: Financial Reporting in the Missing Month When Corporations Change Fiscal Year,” the authors of the study found that out of the 1,786 public firms reviewed from 1993 to 2008, 45.4 percent shifted their fiscal year-end by intervals of up to two months and opined that these changes could “fly under the radar of investors and regulators”—or even change it by a longer duration that is not a multiple of three months. [toggle style=”closed” title=”View Orphans Deserve Attention: Financial Reporting in the Missing Month When Corporations…
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I built an Excel file with a valuation model using Warren Buffett’s measure of “owner’s earnings.” In an interesting spin on valuation, analysts at AquaResearch applied what they call “Buffett-style, owner’s earnings” valuation calculations to the US Bancorp (USB) company stock in a DCF style approach. The author supports his review with a link to an excel file which completely lays out Warren Buffett’s valuation theory, that eschews traditional models relying on GAAP and/or price-to-earnings ratios. The analysis does require viewers to “register” at the site, but it’s free and absolutely worth a look at how the number shake out.…
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Depreciation is not a “paper” expense. It is very real. Fully depreciating capital assets distorts the income statement and balance sheet. The depreciation recorded for tax and financial reporting purposes also tends to distort the net asset value of the asset. Depreciation is not a “paper” expense. It is very real.
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Appraising marina properties is a challenging niche with as many variables as there are bodies of water Just like appraisals on dry land, location plays a major role in developing an opinion of value for a marina property, but the criteria for an appraisal can be a little different from those of landlocked commercial enterprises. Here are a few of the questions that must be considered when valuing marina property.
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The value of California-based electric automaker, Tesla Motors’ earning potential and share price are analyzed after a triple-fold increase from earlier this year. Roben Farzad of Bloomberg Businessweek takes a closer look at attempts by Goldman Sachs to dampen optimism surrounding Tesla’s increasing profit margins. Do the numbers really show Tesla has power to remain consistent with this kind of growth? The very next day, Andrea James of Minneapolis-based Dougherty & Co. stepped up to the mic to counter the Wall Street giant. She wrote: “We ultimately believe that Tesla is a $300 stock at the factory’s maximum capacity, which…
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In a fast and concise analysis, Bill Conerly of Forbes.com examines whether the rise in interest rates, particularly with commercial mortgages, automatically translates into a drop in commercial property value. Conerly explains that your decision-making all depends on whether you take an internal or external view of the process. How can this logic be wrong? Why doesn’t the table show clear real estate losses when interest rates rise? Interest rates on mortgages, bonds, and other long-term debt are not set by the whims of fairies. They are determined by two factors: inflation expectations and economic growth, which combine to…
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A frequently missed opportunity for appraisers This article provides an overview of some of the complex rules relating to the built-in gains tax. It is intended only to acquaint business valuators with the structure of the tax and some of the key considerations which the business valuator must address.
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Will the valuation report prepared by the non-accredited CPA be admitted? The author was recently involved in an Oklahoma domestic relations case where the opposing expert contended he did not have to abide by AICPA valuation standards, reporting or otherwise, since he was not a member of the organization. This article summarizes how this issue was handled by the Oklahoma judge.
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Senators, Bob Corker (R-TN) and Mark Warner (D-VA) introduced a bill on June 25th that would eliminate government-sponsored Freddie Mac and Fannie Mae. Over a five-year phase out, the institutions would be replaced by a new government reinsurer, a Federal Mortgage Insurance Corp (FMIC). Originally reported by National Mortgage News, the structure of the FMIC would be similar to the Federal Deposit Insurance Corp, collecting premiums from industry participants and maintaining an insurance fund. Only after a “substantial amount” of private capital had been exhausted would its backing kick in. FMIC would cover a greater share of losses during “unusual…
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REIT stocks fell sharply in the second quarter, ranging between 11 and 15 percent. Originally reported by the Wall Street Journal, the Dow Jones Equity All REIT index posted a 2 percent negative return in the second quarter. The index hasn’t reported a performance that weak since the third quarter of 2011. Analysts are saying REITs took a dive because investors are nervous about rising interest rates stalling a potential recovery in the commercial real estate sector. Even so, they’re hopeful that REITs will make a comeback by the end of the year. For more details please visit the Appraisal…
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Suggested benchmark analysis to assess the reasonableness of the cost of equity In the February/March 2013 issue of the Financial Valuation & Litigation Expert (FVLE), Issue 41, Jim Hitchner authored “How to ‘Rig’ a Valuation: The Discount Rate.” This is the first of a two-part FVLE series. The article provides suggested guidance to unmask the intentional “rig.”
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“Bank of America spokesman Terry Francisco told Bloomberg that the lender’s program prevents paperwork errors from delaying loan applications and that the overseas completeness checks don’t replace in-depth reviews done by licensed U.S. staff.” According to the Appraisal Institute and Bloomberg, Bank of America (BofA) has opened an office in Bangalore, India to deal specifically with reviewing valuation reports. It’s been said that the move is part of an effort by BofA to increase its share of the mortgage market and lower costs. Earlier this year, BofA eliminated nearly 5 percent of all positions at its Plano, Texas LandSafe appraisal…
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How to apply the landmark cases Delaware MRI (2007) and Bernier (2012) Eric J. Barr, CPA/ABV/CFF, CVA, CFE, analyzes two landmark court decisions—Delaware MRI and Bernier—and offers more clarity on the proper way to value an ownership interest in a pass-through entity under the fair market standard of value.
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Important factors to consider in making tax adjustments to pass-through income Damodaran recently wrote about the potential devaluation of dividend-paying stocks if the preferred dividend tax rate were to climb back up to the ordinary rate. This could inspire valuation experts to make a tax adjustment reducing untaxed Pass-Through Entity (PTE) income to equate it with corporately taxed income that qualifies for tax preference at the shareholder level. Before making this tax adjustment, the valuation expert should consider several factors.
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Should life insurance be considered a repurchase funding asset or a corporate non-operating asset and in what situations?