Recommendation Framework Paper Available; Comment Period Ends October 31st.       Late last month the FASB released its initial staff recommendations on whether and when it will be appropriate to adjust financial reporting requirements for private companies, the Journal of Accountancy reports.  The recommendations are contained in a paper, Private Company Decision-Making Framework: A Framework for Evaluatin ...

Here’s How To Understand the Set-Up and Then Make Pre-Valuation Adjustments Valuation gets tricky when it involves complex ownership structures. Rand Curtiss explains how to approach the appraisal of companies that own interests in other companies, companies that charge fees to affiliated companies, and groups of companies that have several owners each holding different ownership percentages. ...

Relative Levels of Equity and Debt Affect Risk and Cash Flow.   This Has Substantial Impact on Amount Investors Will Pay.     Matt Stelzman notes in the Chattanooga News TimesFreePress that the question that often arises in connection with a business valuation is whether the valuator should use the company's actual capital structure or its anticipated future capital structure. A valuator might also use a pr ...

Enterprise Value is a Perpetuity Concept, but Shareholder Level Values Depend on Expected Holding Periods.  Here’s Why the Difference Matters.  The conceptual logic regarding the income approach is difficult to refute, writes Chris Mercer on the Valuation Speak blog.  What can cause expected cash flows to minority shareholders to be less than the expected cash flows of the enterprise? What can cause the exp ...

Solid Background on Recent Court Decisions, Valuation in US Tax Court, Estate & Gift Tax, Pension Protection, More The Primus Valuation blog offers an in-depth summary of  the proceedings of last year's ASA IRS Symposium in Los Angeles.   Although a bit more than a year old, there's very solid detail here and extensive coverage of issues still very relevant to today's practitioners.  Here's an excerpt f ...

Recommended Valuation Process for Buy-Sell Agreements: Single Appraiser Chris Mercer tells how to set up a Buy-Sell Agreement for closely held and family businesses. He identifies three key procedures: Owners should select an appraiser for their business when they create the Buy-Sell, that appraiser should offer an initial baseline valuation for the Buy-Sell, and the named appraiser should continue to value ...

Winning Skills and Strategies in Writing Exceptional Reports Tom Helling shows how to enhance your own reputation, build future business, and help clients solve problems in your written report. Key ingredients are careful logic, strong research, and good writing. Learn how to do it all. ...

Valuing Trademarks When Diamond Foods bought Kettle Foods, nearly 40 percent of its purchase price of $616M was paid for “brand intangibles.” How are such valuations determined and what are the drivers? ...

Why There is No Such Thing as a Minority Premium Robert Buchanan of PCE Valuations writes about the application of discounts to fractional interests and argues that some appraisers are mistaken when they assert that certain levels of discounts amount to a “minority premium” for certain non-controlling interests. Here’s the logic behind his thinking. Be sure to read Mr. Buchanan's whole argument at HERE. Her ...

Five Limited Partnerships Owned Real Estate Complexes Built in Accordance with Federal Low Income Housing Guidelines  The Appraisal Institute Newsletter notes that Bankruptcy cases assigning value to apartment buildings owned by debtors are required to include the value of remaining low-income housing tax credits.  The news was originally reported by Bloomberg BNA on July 3. A valuation order setting market ...

GuruFocus Adds New Valuation Tab to Site; New Feature Automatically Calculates DCF Valuation.  What are Top 10 The Nasdaq Community site notes the appearance of a new Valuation tab at its GuruFocus web site.  Learn about how DCF analysis works, why it's considered a reliable method of analysis, and view some top current stock picks of an investor who uses the method:    ...

73% of Tech IPOs Aren't Profitable When They Go Public, But Smaller Companies (e.g., Zillow, Bazaarvoice, Jive Software) Fare Better Post IPO Bigger isn’t always better, at least when it comes to initial public offerings, GeekWire reports. A new report out from Tableau Software’s Daniel Hom, editor of the IPO Dashboards blog, finds that smaller tech companies, described as having fewer than $100 million in ...

A Smart Approach to Board Level Risk Management As the economy recovers, companies that cut costs or deferred spending at the bottom of the recession are now looking to reinvest: in hiring, new debt, facilities or equipment, or business acquisitions. How much risk is too much?  This presentation details critical internal and external factors to examine. ...

J.P Morgan Chase, Morgan Stanley Make New Hires.  Other Banks May Follow in Move to Increase Accounting Credibility    At the Wall Street Journal's Overheard On the Street blog David Reilly reports that JP Morgan Chase and Morgan Stanley have made new accounting hires.  Other banks may soon follow suit:    ...

How to graphically illustrate ratio analysis as a way to enhance and simplify summary findings. A key to providing clients with effective valuation reports—and persuading jurors as an expert witness—is the ability to provide quantitative analysis in a compelling visual fashion. Here, Greg Gadawski and Darrell Dorrell provide an example of how to graphically illustrate ratio analysis as a way to enhance and ...

Are Deficiencies More Common?  Or is it Simply that PCAOB Now Successfully Targets Audit Areas Prone to Problems? Emily Chasan at the Wall Street Jurnal's CFO Report delivers the news that The Public Company Accounting Oversight Board has been catching an increased number of audit errors around fair value measurement this year, says PCAOB member Lewis Ferguson. He notes that audit regulators around the worl ...

Emily Chasan at the Wall Street Journal's CFO Journal reports  that the chairman of the International Accounting Standards Board said Wednesday that he expects the board, which sets accounting rules for over 100 countries, will focus on  clarifying some of its most confusing accounting standards once it completes its key convergence projects with U.S. accounting rule makers. ...

Caveats that Careful Valuators and Consultants to Keep in Mind When Using the Market Approach to Valuation Authoritative sources such as the IRS, SEC, FASB, and professional appraisal associations consistently advocate market prices to be the best indications of value. But is that always true? Gregory R. Marsh argues that in some financial markets—at various times—there’s plenty of evidence that both buyers ...

Be Careful When Using EBITDA for the Terminal Valuation Calculation If you’re going to construct consistent valuations, use earnings instead of cash flows in your calculations. Why is it important to be consistent? Because you have to calculate a discount rate based on one or the other. Richard Claywell explains. ...

Capitalized Earnings: When are the Earnings Stabilized? When you're doing a business valuation, should you use a Capitalization of Earnings/Cash Flows? Or should you use a Discounted Earnings/Cash Flow method? Here's a rule of thumb: If the benefit stream will be constant over time, choose the Capitalized Earnings/Cash Flows. Richard Claywell explains. ...