In Related-Party Cost Sharing Arrangements (Part II of II) This two-part paper demonstrates how the discount rate associated with the investment in intangibles developed under a cost sharing arrangement can be calculated using an analytical framework that explicitly considers variability of outcomes in profitability of the intangibles to be developed. Such framework is the probability-weighted scenario analysis. The method of calculating discount rates using the scenario analysis can be applied to compute the PCT payment under both the “income method” and the “residual profit split method” described in the U.S. transfer pricing regulations. The same method also allows to calculate…
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In Related-Party Cost Sharing Arrangements (Part I of II) This two-part paper demonstrates how the discount rate associated with the investment in intangibles developed under a cost sharing arrangement can be calculated using an analytical framework that explicitly considers variability of outcomes in profitability of the intangibles to be developed. Such framework is the probability-weighted scenario analysis. The method of calculating discount rates using the scenario analysis can be applied to compute the PCT payment under both the “income method” and the “residual profit split method” described in the U.S. transfer pricing regulations. The same method also allows to calculate…
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Applicable to Real Estate Holding Companies (Part II of II) In this second of a two-part series published in QuickRead August 01, 2019, the author discusses valuation discounts applicable to real estate holding companies and the incremental adjustments in the valuation of partial, non-controlling interests. After discussing the application of a minority discount or discount for lack of control (DLOC) in the last issue of Real Estate Perspectives, I will now turn to discussing the next incremental adjustment in the valuation of partial, non-controlling interests in entities holding real estate as their primary and most valuable asset. In this article,…
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Bargain Purchase Transactions This article summarizes the fair value measurement guidance and financial accounting considerations in business combinations—and specifically, in bargain purchase transactions. This discussion also describes the principles of acquisition accounting as they relate to fair value measurement. And, this discussion describes many of the valuation analyst considerations regarding the fair value measurement for a bargain purchase transaction.
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Disputes Defensible Best Practices (Part 2 in a 3-Part Series) In this second part of a three part series, the author looks at examples of how potential catastrophes have been avoided or reversed by employing a comprehensive policy audit. He then focuses on what is needed to make a policy audit dispute defensible.
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New private company cost of capital model delivers consistent and observable results The Implied Private Company Pricing Line (IPCPL) Cost of Capital Model seeks to eliminate pitfalls for unsystematic risk, liquidity, small stock premium, PTE taxes, and cash/leverage by utilizing real transaction, market-clearing prices between buyers and sellers of comparable small private businesses.