Five of the 10 Leading Misconceptions (Part I of II) The following discussion summarizes and responds to common misconceptions that many analysts have with regard to the valuation of healthcare entity property and/or services transfers. These analyst misconceptions typically involve a misunderstanding of one or more of the relevant regulatory provisions. These analyst misconceptions typically relate to an erroneous understanding that “the Service only accepts this” or “the Office of Inspector General doesn’t accept that.” These analyst common misconceptions are addressed from the perspective of the regulatory compliance of the valuation analysis. In Part I of II, the article covers…
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What is the effect of goodwill impairment charges when comparing large cap stocks versus small cap stocks? Robert Richardson, a financial analyst with Mercer Capital, examines if higher equity markets have rendered impairment a thing of the past. Find out more in the Mercer Capital’s Financial Reporting article, Small Cap Goodwill Impairments on the Rise. 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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and the Process for the Valuation of a Closely Held Business (Part 1 of 2) Assessing shareholder value for either publicly held or privately held companies are two sides of the same coin. The U.S. capital markets have undergone significant changes in the past several years. This development in turn has had an impact on how these two types of companies are valued. Valuing public companies can be rather straightforward; valuing a closely held or private company is more challenging. In this series, the author will explore some of the methodologies available for valuing a closely held—or private—business.
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Particular challenges can arise in goodwill impairment valuation and accounting when a company acquires a business located in another country. When goodwill accounting standards are strictly applied, under U.S. GAAP or IFRS, the differences between write-offs taken in one country versus another should be minimal. This article delves into some of the notable differences in goodwill impairment conclusions worldwide. Greg Forsythe, CFA, ASA, director at Deloitte Financial Advisory Services LLP discusses methods to minimize these differences. To learn more about the minimizing goodwill impairment differences globally, click here. Image courtesy of Apple’s Eyes Studio/FreeDigitalPhotos.net
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Analyze early and avoid earnings surprises The purchase price allocation (PPA) process is often treated as an afterthought in mergers and acquisitions (M&A). Thinking about PPA can help guide a deal to a more predictable conclusion. In the most rewarding deals, a prompt PPA process helps acquirers analyze, from a financial reporting point of view, the primary drivers or intangible values associated with the transactions.
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Understanding the nature and risk of expected cash flow This discussion summarizes the interrelatedness of the weighted average cost of capital and the weighted average return on assets within the context of a purchase price allocation for financial reporting purposes. Failure to understand this fundamental relationship can lead to inaccurate estimates of value for the acquired assets and, therefore, inaccurate reported asset values and amortization expense on the financial statements of the acquirer. The WACC can be viewed as a weighted average of the required rates of return for the individual assets of the acquired company. The selected intangible asset…
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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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How we define tangible and intangible assets is paramount to accuracy and fairness in valuation. In this article, Dr. Carl Sheeler, responds to a September 9, 2013 concept paper authored by Rick Baumgardner, Chair of the Appraisal Practices Board of the Appraisal Foundation, titled “Valuation Issues in Separating Tangible and Intangible Assets.”
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“It’s a Huge Case for the Patent-Law Community.” On One Side: Google, Facebook, Intuit. On the Other? IBM. “Because the patents are often unclear, there’s no way to know whether an infringement claim by a competitor or a troll is legitimate until you’ve spent $8 million in litigation fees,” said Mr. Schruers Ashby Jones in the Wall Street Journal reports this morning that a federal appeals court in Washington, D.C., will hear arguments Friday over a fundamental question that has vexed the technology industry for nearly two decades: When is a piece of software patentable?
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Is Brand Value Best Calculated by Deducting and Capitalizing Franchise and Management Fees? Or by Weighing Brand Value as a Factor of Revenue? A debate is swirling in the appraisal community regarding the value of intangibles, most notably brand affiliation, reports Patrick Maycock at HotelNewsNow.com. While one party holds to a more traditional viewpoint that calculates such intangibles by deducting and capitalizing a property’s franchise and management fees, the other is looking toward a newer approach that weighs brand value as a factor of revenue:
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Acquiring Companies Need to Conduct a Brand Valuation Post-Acquisition to Comply with IFRS. Here’s Why it Makes Sense to Do it Before the Acquisition. As all companies complying with IFRS must carry out a brand valuation post acquisition for compliance, there’s a strong argument for carrying out the necessary due diligence and valuation beforehand, explains the marketing director of Intangible Business, in a piece first published in Finance Week. Valuing brands pre-acquisition helps management determine how much to pay, it can help finance the deal, prepare the team for integration and identify opportunities for the brand. Seeing as…
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Intangible Assets, Switching Costs, Network Economies, and Cost Advantage Provide a Critical Edge Ron Stacey contends the answer is not a dominant market share, efficiency, or even a talented management team. Companies with lasting advantage tend to be strengthened by intangible assets, switching costs, network economies, and cost advantage. Find out why.
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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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Dentist’s Employment Contract Kills Personal Goodwill Argument – Ninth Circuit Rules Peter J. Reilly on Forbes.com: Tax planners generally think that clients are well served by their thoroughness. I have little doubt that this is generally the case. Every once in a while, though, that little bit of extra work can be counterproductive. In the case of Dr. Howard the extra step, that a less thorough planner might have neglected was the employment contract between Dr. Howard, the dentist and the Howard Corporation of which he was the sole shareholder. The Howard Corporation was a C corporation and when…
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Magic, Sex, and Outer Space Goodwill is the established reputation of a business regarded as a quantifiable asset. Or of a person who’s part of that business: That’s why you often hear discussions about how to best separate personal goodwill from enterprise goodwill. But what if your personal goodwill was regarded so highly, in a contract, that you’d need to work for the new company that was buying you out for six years? And if you left, you’d have to give all the money back? James Altucher reminisces: In 2002 I framed a $200 check from a company called thestreet.com.…