I am a dueling expert in my first contested divorce appraisal in several years. As such, it was interesting to reflect on the issues that have arisen. The subject interest is 100% equity in a security systems installation and monitoring company.
This case involves:
An unresolved valuation date (date of separation March 2009, financials furnished through September [...]
In the movie “Cool Hand Luke”, there is a scene in which the warden, holding his rifle, wearing his mirrored sunglasses, and standing atop a hill above Paul Newman, tells him that “What we have here is a failure to communicate!” That is the metaphor for this post.
How many times have you explained an appraisal [...]
Another theme of my posts has been the relevance of information obtained subsequent to the valuation date in fair market value appraisals. Revenue Ruling 59-60, Section 3, Paragraph 3 tells us that information known or reasonably knowable as of the valuation date is relevant and must be considered (and disclosed in our reports). “Information” is [...]
Current Developments in Fair Value Accounting Valuation Issues
By Robert F. Reilly, CPA, ASA, CBA, CFA, CMA
Introduction
Fair value accounting continues to receive a lot of press, both in the technical accounting and financial journals and in the general business publications. Rightly or wrongly, it seems like the implementation of various fair value accounting standards have caused more controversy than just about any other financial accounting standards changes in the last several decades.
Correctly or not, the financial instrument fair value disclosure requirements were blamed for both the credit crisis and the general economic downturn that occurred in Autumn 2008. Correctly or not, the fair value accounting provisions related to financial institution investments were blamed for the financial distress at many commercial and investment banks.
Much of my writing has a theme: avoiding the weighted average cost of capital (WACC).
In my opinion, WACC makes sense, but it is hard to use!
Capital, like labor and raw materials, comes from different sources, in different amounts, with different costs. If we know those amounts and costs, we can calculate their weighted average.
The problem [...]
In the final analysis, business valuation is all about trust. Many of the issues we confront (and that I write about) concern this fundamental topic.
If we could not trust financial statements, we would all have to become auditors, which would force us non-CPA’s to get a great deal of additional training and vastly increase the [...]
I am currently completing a valuation that has taught me much about whether to value a private company using public guideline methods. The subject is large enough to use these methods, but little else supports them. This post explains my thinking.
Some background assumptions:
A control interest will be sold to a trust benefiting the owner’s heirs.
All [...]
The more you know your valuation methodology, the more time you can save in client meetings, research, and report writing. This is because you can focus like a laser on the right methods to use, and eliminate the wrong ones. In this post I will discuss procedures that are not methods and those that are, [...]
Some business valuation assignments require fixed asset appraisals. In a recent one, I was asked to coordinate the work of both a real estate appraiser and a petroleum geologist, creating a three-ring circus with yours truly as ringmaster. Here are relevant excerpts from my engagement letter.
I will appraise the fair market values of specified non-managing, [...]
