Revenue Ruling 59-60 and business valuation standards require that we consider economic trends in our appraisals. I rarely see a report that does not do this in some fashion: we get it. But our reports do not have to contain multi-page, detailed, quantitative recitations of economic statistics and forecasts for every sector of the economy [...]
Something has been bothering me for a long time about business appraisal, but I could not figure it out until I recently read an article discussing how intelligence services present data obtained from various sources. I was interested to learn that they attach “reliability ratings” to their reports (using a 1 to 5 scale, 5 [...]
The key point about an asset sale is that the selling company’s equity (stock) does not change hands. The selling company’s shareholders retain their equity interests. They still own the company, but the company now owns different assets – whatever it received in exchange for selling its original assets, and it may owe different liabilities [...]
A recent Tax Court case, The Estate of Jorgensen v. Commissioner, shows why appraisers have to be cautious when considering court cases. If you Google the case, you will find many explanations of what happened. To summarize them, the Tax Court voided the transfers of assets to two FLP’s, disallowing their existence. As a result, [...]
You may have read the challenge to the Butler-Pinkerton Model of the cost of equity capital published in the current issue of ASA’s Business Valuation Review and the authors’ rebuttal posted on the Business Valuation Resources website. Both are tough sledding to read since they are highly technical, based on the rigorous mathematics of the [...]
As professionals, our job is to help our clients identify and solve problems. Nobody knows everything; we all have gaps in our knowledge and expertise that limit our problem-solving abilities.
Here is a list of the kinds of experts I am glad to have in my personal network:
Actuaries help with the cash values of life insurance [...]
Some businesses are nearly or completely dependent on specific assets, which can make it very hard to separate the value of the “business operations” from that of the underlying assets. Some recent engagements of mine – all for estate or gift taxation – highlight some of the challenges.
A deceased bowling alley owner’s business owned the [...]
I received a call today from two very competent appraisers who were struggling. They were valuing a non-marketable minority interest and had nailed down everything except for the possibility of future dividends. They wanted to quantify them and consider their effect on the discount for lack of marketability, but were unable to do so because:
1. [...]
I hope that this post stimulates you to learn more about option valuation methodology for several reasons. The demand for such valuations is rising due to the enactment of FAS 123R and IRC 409A which require such valuations for financial reporting and tax compliance purposes. The application of option valuation methodology – more generally, contingent [...]
