The option pricing model, or OPM, is one of the shiniest new tools in the valuation specialist’s toolkit. Travis W. Harms, Mercer Capital Financial Reporting Valuation Group lead, discusses the purpose of this post is to clarify the fundamental insight underlying the model and illustrate its application so that non-specialist users of valuation reports can gain greater comfort with the model. Part 2 will address some qualitative concerns regarding use of the method in practice. To read the full article in Mercer Capital’s Financial Reporting Blog, click: A Layperson’s Guide to the OPM: Everything You Always Wanted to Know About…
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What About Subsequent Events—Lessons from the Valuation of Artwork? In the December 2015 Tax Court Memo Estate of Newberger v. Commissioner, the Tax Court considered post-date-of-death sales prices in the valuation of three separate pieces of artwork owned by the decedent. Considered in one instance was the sale of the actual piece of art itself, and in two other instances, the sale of other pieces of art considered comparable to the art owned by the decedent. Also at issue was how the Great Recession impacts value in the context of reliance on actual or comparable sales transactions. Although this case…
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Mergers and acquisitions (M&A) have continued growing since 2008’s financial crisis. Through the first three months of 2016, the value of worldwide M&A totaled nearly $750 billion. Cross-border M&A activity totaled $308 billion—accounting for a quarterly record-high 41% share of global M&A value. As in previous years, M&A in industries with hefty intangible assets—such as pharmaceuticals and technology, media and telecom—dominated deal making.[1]
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Getting Your Groove Back After Tax Season The adrenaline rush is over, the returns are filed and vacation beckons. However, post-busy-season blues may creep in, observes Cari Weston, CPA, director of the AICPA’s Tax Practice & Ethics Team and a former tax practice owner. She offers ways you can learn from the past season to move your practice forward and celebrate being a tax practitioner. Want to expand your practice beyond preparing tax returns? Consider broadening your scope to incorporate financial planning. To read the full article in AICPA Insights, click: Tax Season Wrap Up.
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How to Avoid Common Mistakes in Accounting Firm M&A Steer clear of these fatal flaws and your acquisition will have a much better chance of succeeding. For firms that want to expand, Brannon Poe, founder of accounting practice brokerage firm Poe Group Advisors, explains how finding strategic solutions to potential roadblocks can greatly impact post-close results. To read the full article in the Journal of Accountancy, click: Acquisition Rules for CPA Firms to Live by.
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How to Keep a Meeting on Track Too often, people sit silently as meetings meander off course and drag on far beyond the scheduled time. Joseph Grenny provides seven ways attendees can get meetings back on track, such as restating problems and making sure everyone understands their responsibilities. To read the full article in the Harvard Business Review, click: 7 Ways to Stop a Meeting from Dragging On.
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The issue of dividends and dividend policy is of great significance to owners of closely held and family businesses and deserves considered attention. This highly informative blog is excerpted from Z. Christopher Mercer’s (founder and chief executive officer of Mercer Capital) newest book: Unlocking Private Company Wealth. To read the full article in Mercer Capital’s Financial Reporting Blog, click: An Introduction to Dividends and Dividend Policy for Private Companies. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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Shift Your Investment Effort How much should a high-growth firm invest in marketing? What techniques or investments pay off more—traditional or social marketing? What should a high-growth marketing firm expect from these investments? How do results differ from firms that are not growing? How do high-growth firms differ from other firms? In this article, Dr. Frederiksen answers these and other questions.
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Visualized Financial Statement Analysis The use of Excel and graphics, commonly referred to as data visualization, can provide a fuller or more holistic view of changes in an entity. Does the traditional audit or report that is devoid of data visualization serve the client? In this article, the author “propos[es] not a replacement for ratios…but rather that financial statement analysis should return to a more holistic analysis of a set of financial statements.” The author showcases how Excel can be used to present a more holistic picture.
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The Case of Trademarks and Brands Since the adoption of fair value accounting governed by SFAS 141 (in 2001) and IFRS 3 (in 2004), hundreds of thousands of different intangible assets have been valued, audited, and reported in financial statements of public companies all over the world. After fifteen years of fair value accounting, the debate about the accuracy of such values and their relevance for readers is no less controversial than at its beginning. This is a pity because, in its essence, fair value data is an excellent resource for corporate finance professionals to understand more about the value…
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Digital Security: Apple, Taxes, and Terrorism The FBI has attempted to compel Apple, Inc. to defeat its own encryption. Because Apple has thus far refused, a federal court in California will hear arguments. The case is certain to have far-reaching implications for the nature of digital security. Adam Junkroski, lead manager Tax Communications for AICPA, explains how the unbreakable encryption at the center of the Apple case affects tax practitioners? To read the full article in AICPA Insights, click: Update on Taxes and Terrorism: Why Client’s Data Could Become Vulnerable.
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The Many Tax Benefits of Making Charitable Contributions With IRA Distributions Now that the provision permitting these contributions is permanent, taxpayers can take maximum advantage of this rule, even using life insurance to increase the gift to charity. David K. Smucker, CPA, Advanced Consulting Group director with Nationwide Insurance, explains that the recent legislation making the $100,000 charitable IRA contribution permanent allows taxpayers to take full advantage of the numerous tax benefits of these contributions. To read the full article in The Tax Adviser Tax Insider, click: Charitable IRA Distributions: A Great Opportunity.
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The presence of an unrecognized device attempting to access your Google account could be a serious threat. J. Carlton Collins, JofA contributing editor, recommends you remove the unknown device and change your password immediately. To read the full article in the Journal of Accountancy, click: Cybersecurity: Unknown Google Device.
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The FASB announced sweeping changes to the accounting for leases earlier this year that will affect nearly all financial statement issuers. Travis W Harms, Mercer Capital’s Financial Reporting Valuation Group lead, discusses each topic. To read the full article in Mercer Capital’s Financial Reporting Blog, click: 7 Things to Know About the New Lease Accounting Rules. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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A Taxpayer Loss—Assets Included in the Estate We find ourselves in a familiar place once again—that is, analyzing a case in which the IRS attacked an FLP under I.R.C. § 2036. Just two months ago, I wrote an overview of Estate of Purdue v. Commissioner, (T.C. Memo 2015-249), in which the IRS attacked a closely-held asset holding company, in that case it was an LLC, under I.R.C. §2036. While both holding companies were attacked under Section 2036, the cases could not have ended up more differently for the taxpayers. Purdue was a taxpayer win; Holliday was not.
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Nuances Valuing and Normalizing an Auto Dealership There are many reasons an auto dealership may require a business valuation; buy-sell agreements, shareholder disputes, employee stock ownership plans (ESOPs), and estate planning and gifting strategies. In many instances, there will be an opposing party that questions the validity of the final value, whether it be a dissenting stockholder or the Internal Revenue Service. It is imperative the dealer be aware of the basic characteristics of a valuation so the dealer is able to make sure the valuation analyst is using sound judgments and that, if challenged, the value will be defensible.
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When it Comes to Messaging, You Can Have too Much of a Good Thing Real-time messaging can be a lifeline—and a huge distraction. Barb Darrow discusses how many companies are embracing internal communication platforms, but the result can be employees using several simultaneously, according to a survey. To read the full article in Fortune, click: When Good Communication Goes Bad.
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Following FASB’s issuance of its new leases standard, the first step in compliance for many companies is an evaluation of whether they possess all the data they need to report under the new rules. Ken Tysiac, editorial director of JofA, explores four key considerations recommended for companies as they work to comply with the new leases standard. To read the full article in the Journal of Accountancy, click: How to Comply with the New Leases Standard.
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When to Report COD Income Because Form 1099-C, Cancellation of Debt, is often issued either before or after the debt was discharged for tax purposes, practitioners need to understand the recognition rules to be able to advise clients when and if to report the COD income. Victoria R. Bartlett, shareholder with Gregory, Sharer & Stuart CPAs, explains that issuance of Form 1099-C does not necessarily require income inclusion in the same year. To read the full article in the Journal of Accountancy, click: Form 1099-C and COD Income: Key Timing Issues.
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For management teams working through a bankruptcy, there are a number of valuation-related considerations. Samantha L. Albert, senior financial analyst with Mercer Capital, explains five key concepts for management teams and their advisors to be familiar with when embarking upon a Chapter 11 reorganization. To read the full article in Mercer Capital’s Financial Reporting Blog, click: 5 Things to Know About Chapter 11 Bankruptcy and Valuation. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.