How do you get buyers and sellers to execute an M&A transaction when the prospects of an industry are extremely uncertain? Part of the answer may be to structure the deal in a way that defers payment of a (significant) portion of the purchase price in the form of contingent consideration. In this blog post, Sujan Rajbhandary, vice president, interviews Travis Harms, who leads Mercer’s valuation for financial reporting practice, to get his thoughts on the new valuation guidance. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Q&A: New Guidance on Valuation of Contingent Consideration (Earnouts).…
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Risk Management, Compliance are Key Challenges, Auditors Say Forty-one percent of audit committee members point to risk management as the biggest challenge to their organizations this year, according to a recent KPMG survey. Other major issues include regulatory compliance and “maintaining the control environment in an extended organization,” respondents said. To read the full article in CFO, click: Audit Committees Face Expertise, Risk Management Challenges.
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In the Crosshairs of Regulators In this article, Mark Zyla of Acuitas discusses trends in fair value measurements in financial reporting and enforcement actions. Mr. Zyla notes that financial reporting is increasingly scrutinized by regulators. He observes that recent inspection reports of accounting firms that audit publicly traded entities by the Public Company Accounting Oversight Board (PCAOB) have indicated an increasing focus on the audit procedures related to fair value. The Securities and Exchange Commission (SEC) has also showed concerns regarding outside valuation specialists who assist management in determining fair value measurements. The increased scrutiny has put a spotlight on…
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Over the past decade, we have been retained by several investment funds to assist them in responding to formal and informal SEC investigations regarding fair value measurement of portfolio investments. Reflecting back on those engagements yields a couple observations and reminders for funds and fund managers as they go through the quarterly valuation process. Travis Harms, Mercer Capital’s Financial Reporting Valuation Group lead, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Portfolio Valuation and Regulatory Scrutiny. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the…
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A Valuation Perspective In this article, three U.S. Tax Court cases are discussed. Each case stems from the fallout which occurred after the discovery of the Madoff Ponzi scheme amounted to more than just lost investments for each of the investors. The end-effect is much more far-reaching and complex, as many investors have been forced to pay hefty legal bills in a battle to reduce their estate tax liability on monies that did not actually exist. To confound the fight, the battles are complex, and sometimes a matter of first impression for the Tax Court.
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Areas of high attention for auditors during the 2016 audit cycle will include a new standard on naming the engagement partner as well as internal control over financial reporting. Ken Tysiac, JofA editorial director, reports that key considerations for auditors in general and auditors of brokers and dealers are discussed in two new publications by the Center for Audit Quality. To read the full article in the Journal of Accountancy, click: Top Considerations for 2016 Audit Cycle.
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Golden parachute payments can lead to significant tax consequences for both the company and the individual. Lucas Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, discusses strategies to mitigate these tax risks to reduce the likelihood of additional excise taxes. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Noncompete Agreements for Section 280G Compliance. 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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Consideration for Closely Held Securities, Part I of II Valuation analysts may be asked to value closely held company securities for various reasons. These reasons include transaction pricing, financial accounting, taxation planning and compliance, and litigation (related to both breach of contract and tort claims). Depending on: 1) the business valuation approaches and methods applied; and 2) the benchmark empirical data used, these analyses may initially conclude the security value on a marketable basis. This initial conclusion may result if the analyst relied on capital market data to extract pricing multiples, present value discount rates, or direct capitalization rates. In…
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While observers appear to be increasingly worried about the proliferating use of non-GAAP measures, a useful debate on non-GAAP measures would probably focus on the nature of their presentation within various disclosures rather than whether or not they should be outlawed altogether. Sujan Rajbhandary, vice president, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Non-GAAP Measures: The SEC Updates Interpretation of Disclosure Regulations. 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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Studies in the Closely Held Company Valuation (Part II of II) In the first part of this two-part discussion, the author identified six transaction risk factors attempting to sell a controlling (including 100 percent) interest in a closely held company. Those included: 1) an uncertain time horizon to complete the offering or sale; 2) “Make ready” accounting, legal, and other costs to prepare for and execute the offering or sale; 3) risk as to the eventual sale price; 4) uncertainty as to the form (e.g., stock or cash) of transaction sale proceeds; 5) inability to hypothecate the subject equity interest;…
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Six Transaction Risks Owners Face Selling a Company that May Explain DLOM (Part I of II) In this first of a two-part article, Robert Reilly reviews the various models analysts use to estimate the DLOM and factors analysts consider in the DLOM selection. Valuation analysts often value closely held companies for transaction, taxation, financing, accounting, litigation, and other purposes. Depending on: 1) the business valuation approaches and methods applied, and 2) the benchmark valuation data used, the analyst may initially conclude the value of the closely held company on a marketable (as if traded on a stock exchange) basis. In…
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The debate over the use of non-GAAP performance measures continues. Even as the prevalence of these items grows in the financial reports of public companies, cautionary tales of the uses and abuses of such metrics garner headlines. Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Non-GAAP Measures: Here to Stay? 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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Over the last several years, various officials at the SEC have expressed concern about the broadening application of fair value measurement and its impact on the reliability and consistency of valuations performed for U.S. public companies. Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article and view the presentation in Mercer Capital’s Financial Reporting Blog, click: Higher Standards for Fair Value. 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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Crowdfunding: SEC Issues an Investor Bulletin The SEC published an investor bulletin recently discussing a number of rules and features related to crowdfunding. Sujan Rajbhandary, vice president and senior member of Mercer Capital’s Financial Reporting Valuation Group, explains the developments, risks, and reasons of interest. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Crowdfunding: SEC Issues an Investor Bulletin. 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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The Securities and Exchange Commission staff published a report of its review of the definition of “accredited investor”. Congress directed the SEC to review the definition every four years in Section 413(b)(2)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the staff recently submitted their recommendations to the Commission. To download this report, click: Report on the Review of the Definition of “Accredited Investor”.
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Startups interested in taking advantage of the final crowdfunding regulations under the Jumpstart Our Business Startups Act passed by the Securities and Exchange Commission a couple weeks ago should be aware of nuances to the rules that may prove challenging. Among other things, companies will have to decide whether to offer investors debt or equity. David M. Katz discusses the new rules and the impact this will have. To find out more on this CFO article, click: JOBS Act Rules Could Spawn Headaches as Well as Capital.
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Obviously, every equity compensation plan is different and the particular tax treatment of a given security depends on the facts and circumstances of the arrangement. Samantha L. Albert, senior financial analyst with Mercer Capital, examines equity-based compensation and the tools available when examining these arrangements. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: The IRS Equity Compensation Audit Guide. 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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Title III is the Newest Crowdfinance Option for Private Companies On October 30, 2015, the SEC finalized the rules for securities crowdfunding under Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012. Title III lets startups raise up to $1 million per year by selling securities exclusively through registered online intermediaries known as crowdfunding portals and broker-dealer offering platforms. And it permits all Americans to invest from $2,000 to $100,000 in those offerings per year, depending on their net worth and income. Title III offerings can launch in spring 2016. This article provides an overview of recent…
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The SEC is casting an eye to examine public company filings. Samantha Albert, Senior financial analyst with Mercer Capital, looks at how their tools have been successful thus far. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: In the Eye of the Beholder: Increasing SEC Scrutiny of Public Company Fair Value Marks. 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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The SEC has proposed new rules and requirements for certain types of incentive-based executive compensation. Lucas M. Parris, Senior Member of Mercer Capital’s Financial Reporting Valuation Group, explains the rules and how they would apply. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: New Rules Aim to Claw Back Incentive-Based Pay. 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/.