Of a Real Estate Centered Entity As business valuation analysts, how many of us have ever agreed to value an equity interest in a gas station, or a hotel, or some other business that operates with real estate as an operating asset? For me, that answer is “frequently.” Yet, over the years my view of how to undertake this type of assignment has changed. These types of businesses deserve more care and understanding than a simple net cash flow divided by some cap rate. As business valuation analysts, how many of us have ever agreed to value an equity interest…
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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 types of assignments is relying on separately completed real estate appraisals that are frequently incorrectly developed based on an inappropriate premise of value. This article provides readers a conceptual framework to valuing these types of businesses. Real Estate Centered Business Enterprises (RECEs) commonly…
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and other Court Cases for Valuation and Litigation Support Professionals Valuation practitioners may want to spend a few hours reading a recent U.S. Tax Court case where the valuation of intangible assets was squarely addressed. This QuickRead article highlights the facts and three issues addressed in the decision.
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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/.
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Executive managers of companies and not-for-profit organizations must make more uniform disclosures if there is significant doubt about a company’s ability survive, according to new standards released by the Financial Accounting Standards Board August 27, 2014. Under Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, management is required to evaluate at each annual and interim reporting period whether it’s probable that the company will not be able to meet its obligations as they become due within one year after the date financial…
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The Public Company Accounting Oversight Board (PCAOB) has beefed up its requirement for auditors to clarify the nature of relationships and transactions between related parties. The new standards were instituted by the PCAOB to counteract a number of factors that it felt were contributing to financial fraud. Ultimately, the intention is to help companies avoid financial failure and reduce harm to investors. To review the three key areas the PCAOB is stressing in its revised standard, please visit Goingconcern.com. [button color=”blue” link=”http://goingconcern.com/post/pcaob-adopts-auditing-standard-no-18-crony-disclosures” target=”_blank” font=”arial” align=”left”]Read Full Article[/button]
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The standard 10 stages to use in an intangible asset engagement In this second installment, Robert F. Reilly completes his review of the 10 typical stages of any intangible asset analysis engagement. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, and after performing any quantitative or qualitative analyses.
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The standard 10 stages In this first half of his two-part series, Robert F. Reilly summarizes six of the ten typical stages of any intangible asset analysis assignment. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, and after performing any quantitative or qualitative analyses.
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Cases in Ohio, Delaware Assess Acquisition Share Value, Family Business In Iacampo v. Oliver Iacampo, the Ohio Court of Appeals rules on the appropriate use of experts in valuing a family business, the nature of passive income, and financial help from the wife’s parents. In Delaware, Gaerreald v. Just Care, Inc. turns on proper methods for determining share value, the value of an expert opinion, and deference to management projections.
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In Berquist v. Commissioner, Judge Swift Finds a Company’s Pending Liquidation is Relevant and Foreseeable. The Tax Court valued closely-held stock in an anesthesiology practice donated to a hospital for charitable contribution purposes at its liquidation value since the anesthesiology practice would no longer exist after the physician-stockholders were consolidated into a newly-formed umbrella physician management company. The donors valued the practice at $401.79 per share under the going concern premise of value. The respondent determined a fair market value of $37.00 per share under the liquidation premise of value. The Judge cited one key factor that determined his ruling. …
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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.
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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 simplify summary findings.