Fraud’s History is Impressive: From Over-the-Counter Cure-Alls to Florida Real Estate and Musical Talent Fraud The Association of Certified Fraud Examiners has built up a choice collection of fraud souvenirs under founder and chairman Dr. Joseph T. Wells. Visit the Accounting Today site to see some of the most notable pieces, which include Bernie Madoff’s cigar box, an Enron stock certificate, a Nigerian Fraud letter, actual documents from the 18th Century South Sea Bubble, Orangeine Over-the-Counter Medicine, a Florida Land Warranty Deal, a Swedish Match King [Ivan Kreuger] Debenture Certificate, Musical Frauds [“Your song may have great merit!”], an 1854 Police…
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How Much Do You Know about Protecting Personal and Corporate Information from Would-be Fraudsters? Find out what you know about how to analyze credit, what causes data breaches, what precautions to take when accessing hotspots in an airport with a laptop, current identity theft laws, and controlling physical access to restricted areas.
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Catastrophic Events and Consequences for Value Managing catastrophic risk exposure is much more difficult than managing continuous risk exposure, explains Aswath Damodaran. Here’s how to incorporate the risk from catastrophes into valuation models.
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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?
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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. Here are some key points:
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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 price of debtors’ low-income housing properties must consider tax credits that are covenants running with the real properties. The fair market value of apartment buildings in a bankruptcy case must include the value of the remaining federal low-income housing tax credits, the Bankruptcy…
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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:
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A County Buys a Strip Mall Under Eminent Domain Process; at Issue is Whether Chairs and Tables Require Additional Tax A Bankrate Tax Talk column at Fox Business News Personal Finance site considers a rather unusual case of a strip mall’s sale:
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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 revenue, performed far better on Wall Street following their initial public offerings:
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The Most Critical Challenges Confronting Medical Practices Recently, the Medical Group Management Association (MGMA) published results of its member survey and listed the top challenges facing physician practices today. Reed Tinsley recaps results. Here are critical factors physician executives should focus on to control costs, build incentives, ease management, and strengthen growth.
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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.
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Tips for Family Businesses to Survive and Thrive When Tough Times Hit Can You Revive Your Distressed Family Business? The first step to figuring that out, Steven F. Agran explains, is an objective assessment of cost structure. What determines whether a business can be cash flow positive at current sales levels or even at lower levels, if sales continue to decline? Find out here.
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Shielding the Family Business The best part for valuators is that all of this requires a professional appraisal (detail below). The Wall Street Journal Tax Report‘s Laura Sanders reports that: Small-business owners often complain of feeling caught in the cross hairs of the tax code. For a change, here’s good news. The Tax Court has just blessed a new technique that owners of closely held businesses—and wealthy families—can use to pass assets to heirs with a minimum of taxes and complications. The ruling in the case, Wandry v. Commissioner,[T.C. Memo. 2012-88 (Mar. 26, 2012)], is stirring up excitement among experts. David Kautter, a director of American…
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Two New Taxes on Net Investment Income and Medicare Will Take Effect on January First At the Wall Street Journal’s Tax Report, Laura Saunders explains. The word is out: Two new taxes on the affluent and wealthy will take effect as scheduled next year as a result of the Supreme Court’s decision upholding the health-care overhaul. One is a new 3.8% tax on net investment income, and the other is a 0.9% increase in the Medicare tax on wages and self-employment income. Both levies apply to joint filers with adjusted gross incomes above $250,000 ($200,000 for singles). A recent…
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The Supreme Court Has Long Distinguished the Taxing Power from the Regulatory Power Paul Moreno, professor of history at Hillsdale College, details the history on the Wall Street Journal opinion page: The first enumerated power that the Constitution grants to Congress is the “power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States.” The text indicates that the taxing power is not plenary, but can be used only for defined ends and objects—since a comma, not a semicolon, separated the clauses on means…
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Wealth Managers: Proceed with Caution When Setting Up an FLP Once an esoteric way for families to centralize management of assets, the Family Limited Partnership (FLP) is becoming extremely popular this year, writes the New York Times. Why? Because of the scheduled expiration of the $5.12 million gift tax exemption at the end of this year. Still, setting up an FLP doesn’t make sense for all companies.
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In 2009 Duff & Phelps and the Financial Executives Research Foundation (FERF) first published the results of their comprehensive Goodwill Impairment Study. The 2009 Study examined U.S. publicly-traded companies’ recognition of goodwill impairment at the height of the financial crisis (the end of 2008 and the beginning of 2009), and featured a comparative analysis of the goodwill impairments for over 5,000 companies (by industry), as well as the findings of a survey of FEI members.
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Reviewing and Revising Partner Agreements. In my prior firm, the review and revision of partner agreements was a process that happened every ten to fifteen years, if that often. I think that is pretty common in most firms. The problem is that firms change and evolve as do the partners and the environments that we practice in. Our agreements need to keep pace with that change. I continue to be amazed at the number of firms that have no agreements at all or haven’t made revisions in many years.
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Ron Stacey considers Return on Invested Capital (ROIC) and growth using EBITDA as a proxy for cash flow. ROIC, Stacey writes, is a critical value driver that’s probably the single most important factor for a given cost of capital. But calculation is never simple: “People always want a formula, but it doesn’t work that way,” Warren Buffet once noted. “You have to estimate total cash generated from now to eternity, and discount it back to today.” Here’s a case study. Find out how ROIC works—and what drives it.
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In Palmerino v. Palmerino, the Massachusetts Court of Appealsconsidered whether a trial court erred in valuing the husband’s grocery store. The trial court’s approach had not included discounts—and went further to state that the income approach is preferable for valuation. Find out what the court decides! In Giaimo v. Vitale, the Supreme Court of New York considers the dissolution of a company called EGA Associates. The case involved the sale of 19 residential buildings in Manhattan, accusations of fraud during discovery hearings on fair value, and the applicability of proposed discounts for marketability and built-in capital gains.