Approaches and Methods This third of a five-article installment discusses the application of the unit valuation principle. The discussion continues with a summary of the generally accepted unit valuation approaches, methods, and procedures. Read Part I here. Read Part II here. Introduction This installment is part three of a five-article series related to the unit valuation principle for ad valorem property tax purposes. Part I summarized what analysts need to know about the application fundamentals related to the unit principle valuation of complex, utility-type properties for property tax compliance, administration, and controversy purposes. Part II explained when it was appropriate…
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(Part I of V) This is the first article of a five-installment discussion that will summarize the application of the unit valuation principle. As will be described, a unit principle valuation is not a business valuation. However, business valuation analysts are often more comfortable with the development of unit principle valuations than are real estate or personal property appraisers. Introduction This five-installment discussion will summarize the application of the unit valuation principle. As will be described, a unit principle valuation is not a business valuation. However, business valuation analysts (hereinafter “analysts”) are often more comfortable with the development of unit…
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For Preventing Fraud and Driving Business Growth The importance of strong internal controls cannot be overstated. They form the foundation for financial integrity, operational efficiency, regulatory compliance, and, ultimately, long-term business success. This article explores how strong internal controls not only safeguard against fraud but also serve as a catalyst for business growth and sustainability. In today’s fast-paced and evolving business environment, the importance of strong internal controls cannot be overstated. Most business owners and managers associate internal controls with fraud prevention and detection. However, effective internal controls serve a much broader purpose. They form the foundation for financial integrity,…
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Book Review This fall, the American Bar Association released Shannon Pratt’s The Lawyer’s Business Valuation Handbook 3rd Edition. This publication has been edited by Roger J. Grabowski, FASA and Alina Niculita, ASA, ARM-BV, CFA, MBA. It is a comprehensive guide for attorneys (and judges) to enable them to better understand the substance and basis of the valuation expert’s work. In this article, Michael G. Kaplan reviews the book. I Had a Problem! I received a phone call from an attorney. He was representing a client involved in a hotly contested lawsuit involving the impairment of the value of a business.…
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Part III of III This article is the third and final of a three-part series on intangible property and property tax appraisals. Read Part I here and Part II here. Valuation analysts are often retained by industrial and commercial companies to assist with state and local property tax planning, compliance, and controversy matters. Often, analysts are retained by the legal counsel for the corporate taxpayers. This is particularly the case when the property tax matter involves an assessment appeal or litigation regarding the amount of the property assessment. The articles in this series focus on the valuation of intangible property…
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Part II of III This article is the second of a three-part series on intangible property and property tax appraisals. Valuation analysts are often retained by industrial and commercial companies to assist with state and local property tax planning, compliance, and controversy matters. Often, analysts are retained by the legal counsel for the corporate taxpayers. This is particularly the case when the property tax matter involves an assessment appeal or litigation regarding the amount of the property assessment. The articles in this series focus on the valuation of intangible property within the context of ad valorem property tax disputes. Introduction…
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Part I of III This article is the first of a three-part series on intangible property and property tax appraisals. Valuation analysts are often retained by industrial and commercial companies to assist with state and local property tax planning, compliance, and controversy matters. Often, analysts are retained by the legal counsel for the corporate taxpayers. This is particularly the case when the property tax matter involves an assessment appeal or litigation regarding the amount of the property assessment. The articles in this series focus on the valuation of intangible property within the context of ad valorem property tax disputes. Introduction…
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It is all Based on Your Perspective The purchase price of a transaction can look vastly different. Therefore, when considering the prices of various transactions, it is important to know how those prices have been calculated so that one has a consistent perspective and is not comparing apples to oranges This article illustrates the various perspectives that may emerge in connection with a purchase price. With football playoff season on the horizon, I cannot help but think about September 24, 2013—a night that many football fans will not soon forget. The Seattle Seahawks were playing the Green Bay Packers on…
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Part III of IV This four-part article summarizes what valuation specialists in all property appraisal disciplines (herein called “appraisers”), company managements, and their legal counsel need to know about property appraisals prepared within a bankruptcy environment. For purposes of this discussion, the term property includes real estate and real property, tangible personal property, and intangible personal property. Part one of this article discussed the reasons to conduct the bankruptcy-related property appraisal. Part two of this article discussed (1) the elements of the property appraisal assignment and (2) the appraiser’s due diligence considerations. This third part summarizes the generally accepted bankruptcy-related…
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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 part imagines some changes that may occur in a world where big companies pay taxes based (mostly) on GAAP income. Here, the author envisions many items…
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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 changes that may occur in a world where big companies pay taxes based (mostly) on GAAP income. This is the first of a two-part article related…
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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 of V)[/su_pullquote] Introduction This five-part series of discussions introduces the market approach and the relief from royalty (RFR) method of intellectual property valuation. Part one of this discussion introduced the typical types of intellectual property and the generally accepted intellectual property valuation approaches and methods.…
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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 application of the market approach. This discussion focuses on one market approach valuation method: the RFR method. The RFR method is often applied to value an owner/operator’s intellectual property for transaction, taxation, financing, accounting, litigation, and many other…
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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 deviations from GAAP and understand how to make the necessary adjustments. Valuation principles require the financial statements used be prepared based on generally accepted accounting principles (GAAP) unless there is a different agreement by the parties to the…
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Finance & Accounting for Lawyers, Second Edition, by Brian Peter Brining, JD, CPA BVR has just released Finance & Accounting for Lawyers, Second Edition, by Brian Peter Brining, JD, CPA. The purpose of this edition is to provide the reader, lawyers particularly, with a technical overview of accounting principles and methods so the knowledge can be applied in the practice of law. In the finance and valuation sections of the textbook, the reader is introduced to the principles of finance and valuation that underlie monetary transactions that are the subject of contracts, tax matters, disputes, and litigation. The textbook proceeds…
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Buyer and Seller Beware When a privately-held acquirer uses its stock to partly purchase a company, it is imperative that both the acquirer and the target in a transaction have support for, and a level of comfort with, the value assigned to the acquirer’s shares if they are being issued as part of the deal. It is especially important for the seller to conduct its own due diligence to better assess its risk exposure and understand the fair value of intangible assets. This article discusses procedures that sellers and buyers should consider before finalizing the terms. We are all familiar…
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It is all Based on Your Perspective In this article, the author presents three common ways that a single purchase price may be calculated and presented. With football season on the horizon, I cannot help but think about September 24, 2013—a night that many football fans will not soon forget. The Seattle Seahawks were playing the Green Bay Packers on Monday Night Football. The game was going down to the wire and Seattle trailing 12-7 with only a few seconds remaining. With time expiring, Seattle quarterback Russell Wilson heaved a 24-yard pass to receiver Golden Tate in the endzone. Green…
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on Corporate Income Taxes What corporate tax rate should valuation practitioners use going forward given the current environment? Despite corporate rates being “permanent”, is that so?! How should practitioners handle temporary differences? How do we decode a financial statement? In this article, the author shares his thoughts on how valuation professionals should approach a valuation engagement in this uncertain tax environment.
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Must Know Accounting Rules Earnouts are often used in transactions to bridge the gap between what a buyer is willing to pay up front and what a seller wants in the way of total compensation to complete a deal. Therefore, earnouts are typically constructed to allow the seller to enjoy additional upside if the acquired company reaches certain performance targets after the sale while providing the buyer with downside protection if the projected performance after the deal closes does not materialize. That said, practitioners must understand accounting rules that could result in an earnout not being deemed an earnout. The…
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New lease accounting standards come into force at the start of next year which will fundamentally change how companies can report off-balance sheet financing. How will the new rules affect finance leaders? To read the full article in Accountancy Age, click: Lease Accounting Standards: Are Multinationals Sitting on a “Leaseberg” of Huge Proportions?