Rosenthal v. Erber illustrates the pressure and perils of dueling experts. The expert is charged with assisting the court ascertain the facts, rather than furthering the client’s ambition. The case is a reminder to business valuation professionals that ethical considerations are paramount and that doing the contrary leads to courts’ suspecting the role of experts in the process. In the main, valuation experts pride themselves on reasoned analysis and well supported use of professional judgement. As a profession, valuators are confident that most reports uphold the demanding standards of the profession. Judges, on the other hand, do not always view…
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Normalization Adjustment Steps and Practice Pointers Reasonable compensation is among the most common of all normalizing adjustments in valuations of closely held businesses. The dollar amounts involved can be significant, the issues can be complex, and the valuator’s conclusions can be controversial. In preparing to make these adjustments, there are a series of steps that are normally followed. Among the steps are gathering relevant facts and making appropriate assumptions. Other steps include identifying the commonly accepted approaches or methodologies and locating reliable sources of benchmarking data. Then, the more complex steps may be forming defensible conclusions and explaining them in…