Calculating Discounts Accurately Depends a Lot on Company Specifics. Here’s What You Need to Know Dennis Bingham and KC Conrad provide a thorough look at options for calculating a discount for lack of marketability (DLOM), including restricted stock studies, pre-IPO studies, theoretical and option pricing models, discounted cash flow (DCF), Mandelbaum factors, and more. ...

Here’s How a Systematic Review of Risk Can Help Valuators Assign Appropriate Discounts and Premiums Industry risk can vary widely from company to company and industry to industry. Here are 20 questions valuation analysts can use to identify risk related to market segment; competitive position; political, environmental, and legal factors; pricing trends; profit margins, and more. ...

The FASB Lists 29 Different Intangible Asset Categories. Here’s What You Need to Know. Intangible assets have comprised an increasing proportion of the value of assets of most companies in the last decade, Gregory Marsh explains. Often a collection of intangible assets is accounted for as a single asset labeled “goodwill.” Here’s why that sometimes doesn’t make sense. ...

Disaster Area Declarations Have a Lot of Tax Implications.  Learn Specifics. Natural disasters, such as Hurricane Sandy, may provide certain tax opportunities and insurance recovery situations that business owners and individuals should be aware of.   Howard A. Lewis, MS, ABAR, AVA, and Former IRS Program Manager for Valuation Service offers insight: ...

Willamette Management Author Explains: What You Need to Know About DLOMs Aaron Rotkowski explains why it’s appropriate to apply a DLOM to a controlling ownership interest—and how to figure it—and why it doesn’t make sense to rely on restricted stock studies and pre-IPO studies to estimate the DLOM for that interest. Find out more. ...

IFRS News Offers Summary of Significant Developments in International Financial Reporting Standards (IFRS)   Grant Thornton's IFRS team publishes a quarterly update on developments in the international accounting arena: ...

WhitServe Alleges that Mac OS X Infringes on a Patent it Holds for "Sequentially Opening and Displaying Files in a Directory."  Steve Musil at c:net  reports that WhitServe, which owns intellectual property but doesn't make any real products, is suing Apple over allegations that versions of the Mac OS X operating system infringe on a file viewer patent it holds: The complaint, filed today in U.S. District C ...

Federal Agency Identifies Valuation Risk Factors and Best Practices Could the Securities Exchange Commission’s informal inquiry regarding valuation be an opening salvo to allow more formal investigation, or even regulatory action? The McLean Group shares an in-depth analysis of the SEC’s findings. ...

Valuators Must be More Than “Lucky Punks” How can appraisers best figure the cost of equity capital? Rand M. Curtiss argues that using standard tools including Ibbottson, Duff & Phelps, CAPM, or the Butler-Pinkerton model aren’t enough. What to use instead? Curtiss suggests starting with a look at the rate of return on mezzanine money and the rate of return on later-stage VC investments. Find out why. ...

Critically Assess Underlying Data and an Appropriate Method for Value Determination Richard Claywell regularly reviews business valuations that seem to consider the asset, market, and income approaches in forming an opinion, but that never explain or justify a weighting methodology used to arrive at a final value conclusion. Here’s why that’s a mistake.   ...

Appeals Courts in Iowa and Mississippi Settle Divorce Disputes The Mississippi Court of Appeals reverses a trial court’s ruling in Marter v. Marter because of a valuation without sufficient evidence, and the Iowa Court of Appeals affirms the value of a wife’s intangible contributions to a business in re Marriage of Kinser.  ...

Should Losses Trigger an Immediate Charge or Later Write Down? The Financial Accounting Standards Board (FASB) is engaged in an interesting discussion with the International Accounting Standards Board (IASB) regarding how quickly bad loans need to be recognized by banks. Here’s the essence of the dispute. ...

Fairness Opinions Help Mitigate Conflicts of Interest, Establish Transaction Credibility, and Avoid Unfavorable Tax Issues Brian A. Sullivan and Andrew C. Smith discuss how you can leverage fairness opinions to mitigate conflict of interest, avoid unfavorable tax issues, and help secure acceptance of transactional decisions by minority shareholders. ...

New Operational Risk Thinking Can Help Predict and Prevent Disasters of a Global Scale and Improve Bottom Lines as Well In an interview with Renee Boucher Ferguson of the MIT Sloan Management Review, Kathleen Long discusses some of the threats operational risk can pose to a company and how her company, Montage Analytics, is helping businesses combat these dangers. ...

At Stake was Client Confidentiality   The Appraisers Guild reports on an important bit of recent case law.  On August 10, the Arizona Board of Appraisal dismissed the USPAP violation complaint filed by Chase Bank against John Dingeman on initial file review.  Why is this newsworthy?  Because it represents a major victory for appraisers everywhere.  Dingeman, has been fighting strong arm tactics employed by ...

ESOPs serve as a utilitarian strategy for business owners looking for unique and effective ways to improve employee benefits and business flexibility. William Stewart explains how an ESOP, depending on how you set it up, can function like a Swiss Army Knife. Depending on how you set it up, an ESOP is fully flexible. ESOPs, for instance, offer buyers and sellers a wide range of purchasing options that can va ...

UConnect v. Facebook Showed How 409A Valuations Can Destroy Value. Here’s What Shareholders and VCs Need to Know—and Some Ideas About How to Better the Situation. Lorenzo Carver previously explained how 409A valuations destroy value for shareholders receiving grants, and provided a case study of how this all played out in UConnect v. Facebook. In this final article in a three-part series, Carver presents us ...

The Risk-Free Rate is the Cornerstone in Finance for Estimating both the Cost of Equity and Debt Capital. In corporate finance and valuation, both academics and practitioners have long used government security (U.S. Treasury Bills and Bond) rates as proxies for risk-free rate of return. How do credit downgrades affect the risk-free rate for private company valuators? Anthony Banks explains. ...

The Winklevoss Twins Realized Too Late the Value They’d Agreed to for Their Common Shares of Facebook. Here’s How it Played Out. Last week Lorenzo Carver introduced the topic of how 409A valuations destroy value for some shareholders.  Today’s piece is a case study in how a wide disparity in value estimates largely created by the 409A process played out in the UConnect v. Facebook lawsuit. ...

Why Built-up Volatility Rates Produce Better Value Indications In part one of a three-part series, Lorenzo Carver explains how the interaction between auditors and valuation professionals during dual-purpose 409A valuations of common stock and employee stock options destroys value for hundreds of thousands of employees receiving stock options every year by granting options at strike prices that are above th ...