The Consequences When there is a Mismatch Between the CEO’s Strategy and the Lifecycle the Company is Operating In On December 10, 2021, Aswath Damodaran published a blog titled Musing on Markets. In this blog he asked what makes for a “great CEO”? What happens when there is a mismatch between the lifecycle the company operates in and the strategy pursued by the CEO? He then answered these questions based ( ...

Part II of II This is the second of a two-part article (read Part I) related to the proposed (mostly) GAAP-based income tax in the (perhaps fatally wounded) Build Back Better Act. While the Build Back Better Act may be dead, the GAAP-based income tax is a polarizing concept that may be resurrected soon. The first part focused on why there is a push by some—and pushback by others—on such a tax. The second pa ...

Part I of II This is the first of a two-part article related to the proposed (mostly) GAAP-based income tax in the (perhaps fatally wounded) Build Back Better Act. While the Build Back Better Act may be dead, the GAAP-based income tax is a polarizing concept that may be resurrected soon. The first part focuses on why there is a push by some—and pushback by others—on such a tax. The second part imagines some ...

How (Use of) the Unknown Will Kill You On November 17, 2021, Jim Hitchner presented “How to Attack and Defend the Databases Used by Valuation Analysts”. The presentation raised the following questions: Have you ever been cross-examined by an attorney who is more familiar than you with databases referenced in the valuation report? When was the last time, if ever, that you reviewed and studied the methodology ...

Analysts Caveats and Reporting Guidelines (Part V of V) This fifth and final installment presents valuation analyst caveats and reporting best practices related to the intellectual property valuation. Intellectual Property Valuations: The Relief from Royalty Method (Part I of V) Intellectual Property Valuations: Elements of the Valuation Analysis (Part II of V) Intellectual Property Valuations: Application ...

Illustrative Example of the Relief from Royalty Method (Part IV of V) Previous installments of this five-part discussion summarized the development of the market approach and the relief from royalty (RFR) method of intellectual property valuation. This fourth installment presents an illustrative example of the practical application of the RFR method. [su_pullquote align="right"] Intellectual Property Valuat ...

Application of the Relief from Royalty Method (Part III of V) This is the third article of a five-part series on valuation of intellectual property describing the application of the RFR method. Intellectual Property Valuations: The Relief from Royalty Method (Part I of V) Intellectual Property Valuations: Elements of the Valuation Analysis (Part II of V) Introduction This five-part discussion focuses on the ...

Anecdotes from James R. Hitcher of Moments Spent with Dr. Shannon P. Pratt, a Pioneer in the Business Valuation Industry This discourse shares the author’s long, rewarding relationship with Dr. Shannon P. Pratt, an icon in business valuation (BV). He lived and breathed BV. Outside of his career, he had an intense love of life and liked to have fun. The author, James R. Hitchner, shares what he learned from ...

Elements of the Valuation Analysis (Part II of V) This second article of the five-part series on Intellectual Property Valuations summarizes the typical elements of the intellectual property valuation analysis. This part of the discussion focuses on benchmarking and the use of research databases. [su_pullquote align="right"]Resources:Intellectual Property Valuations: The Relief from Royalty Method (Part I o ...

The Relief From Royalty Method (Part I of V) This is the first article of a five-part series that focuses on what valuation analysts and owner/operators need to know about one category of intangible property: intellectual property. There are generally accepted cost approach, market approach, and income approach methods that may be used to value intellectual property. This discussion focuses on the applicati ...

Preserving a Legacy In this article, Roger J. Grabowski, FASA, shares with readers a personal story regarding his friendship. The forthcoming 6th edition is a tribute to Dr. Pratt, a close friend and leader of the profession. [su_pullquote align="right"]Tribute to Shannon Pratt[/su_pullquote] Introduction I am fortunate to have co-authored several books with Shannon. While I had gotten to know Shannon throu ...

Avoiding the Chaos and Selecting the Proper Methodology Over the past 20 years, business valuation analysts (and the courts) have debated whether there is an S corporation premium vis-à-vis the C corporation. This debate has led to the profusion of models and confusion. Four predominant models currently in use include: the Fannon, Delaware MRI, Van Vleet’s SEAM, and Treharne Model. Each of these models make ...

Part IV: Illustrative Examples Part I of this series discussed the conceptual foundations of the cost approach to intellectual property valuation. Part II described the generally accepted valuation methods within the cost approach to intellectual property valuation. Part III presented the practical measurement procedures in the application of the cost approach. In this final installment of this series, Part ...

What to Ask for and Use? Most small businesses use the cash basis of accounting. Despite that practice, prospective clients will prepare their books in a variety of different ways that do not conform with the accounting cash basis. There are hybrid and accrual cash basis and the business valuation practitioner needs to recognize the differences between these forms of accounting. In this article, the author ...

Part III: Practical Procedures Valuation analysts are often called on to value intellectual property for various transaction, taxation, financial accounting, corporate planning, litigation, and other reasons. In this Part III of this series, the discussion focuses on the practical measurement procedures related to the application of the cost approach in the intellectual property valuation. [su_pullquote ali ...

A Conceptual Framework to Consider Real Estate Centered Business Enterprises (RECEs) commonly sell as real property going concerns with elements of real estate, personal property and a business enterprise component. Business appraisers face several challenges with these assignments due to the interdependence of the business with the other assets. Another key challenge for business appraisers with these type ...

Part II: Valuation Methods Part I of this four-part discussion considered the conceptual foundations for applying the cost approach to value intellectual property (including patents, copyrights, trademarks, and trade secrets). Part II summarizes the generally accepted valuation methods within the cost approach. Introduction Part I of this four-part discussion considered the conceptual foundations for applyi ...

Why it Matters This article examines the major nonconformance issues the average valuator may face, where to find the information necessary to investigate, and how to make the adjustments to conform with GAAP. The adjustments discussed are not exhaustive but do cover the more common adjustments valuators should consider. While a valuation is not an audit, the valuation analyst must recognize material deviat ...

Development Standards and the Guidance Provided by the Kohler Decision The General and Ethical standard sets the overall values that must guide every expert in the exercise of his/her profession. One of the key steps in the Development Standard is the site visit and management interview. Some BV experts delegate this important responsibility to either their staff, or a different BV analyst in their firm and ...

Part I: Conceptual Principles This is a four-part article series. The articles and discussion focus on the conceptual principles and the practical applications of the cost approach in the development of intellectual property valuations. Part I of this discussion focuses on the conceptual principles that support the application of the cost approach to intellectual property valuation. Part II describes the ge ...