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January 30, 2020 | Earn CPE | NACVA | CTI

Estimating Nonprofit Corporation Asset Values (Part I of III) This is a three-part article that focuses on valuing nonprofit corporation assets. Valuation analysts are commonly engaged to provide fair market value guidance related to nonprofit business transactions. Nonprofit businesses are often involved in arms-length transactions. Common transactions include royalty payments for the use of intellectual property, royalty revenue earned by licensing intellectual property, sales of assets, and purchases of assets. If the subject transaction is between a nonprofit and a related party, the transaction is required to be a fair market value transaction. This series provides an example of certain steps and procedures that can be used to value the assets of a nonprofit business. Read More »

Blockchain Trends for 2020 and Beyond Merriam-Webster dictionary defines blockchain as a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network. In this article, the author predicts blockchain trends and its impacts of the accounting profession. Read More »

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Transfer Pricing Business Models: Aligning Business Models and Business Practices A key factor in establishing a reasonable transfer price is establishing the business model used by sales and distribution organizations. In this article, the authors describe the three primary models and their relevance establishing and defending a transfer price. Read More »

How Not to Use Duff & Phelps Data “In God we trust. All others must bring data.” This famous saying has been attributed to various people, but it implies that when data is presented, the conclusion can be trusted. However, the Ohio District Court’s decision in Rover Pipeline, LLC v. 10.55 Acres of Land, More or Less, in Ashland County, Ohio, et al., demonstrates that data is only trustworthy if it is understood and applied correctly. The case, in which the expert’s valuation report was discarded due in large part to the misuse of data, demonstrates the risk of misapplication of data in valuation reports and highlights how the misuse of data can prevent an accurate assessment of value. Read More »

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Market Participant Acquisition Premiums in Valuations For Financial Reporting Purposes

In this article, the author revisits the Market Participant Acquisition Premium (MPAP) issued by The Appraisal Foundation and reiterates the findings regarding what is a premium and what that means.

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February 1, 2018 |   NACVA  |   CTI  |    |   The Surprising Role of Client Education in Closing New Business Deals Client education can have a huge impact in accounting and professional service firms’ content marketing efforts.  By providing prospects with increasingly valuable pieces of educational content, you can not only attract them to your firm, but also nurture them as they move into and through your sales funnel. Read more» Why All Values Are Not Created Equal: Understanding Terms and Bridging a Potential Valuation Gap It is not uncommon for litigation to stem from disagreements over the value of privately held companies and ownership interests in those entities.  In those situations, many different values are often discussed as the parties attempt to reach a resolution.  It is important to make sure that the parties are speaking the same language as far as the type of value being considered—equity value, enterprise value or invested capital value.  While these three types of value are related, there are significant differences between them and understanding those differences is important in reaching a fair resolution.  In his article, the author walks through the differences in equity, enterprise, and invested capital value he shares with attorneys and views as additional tools to effectively navigate valuation-related disputes and negotiations. Read more» In Case You Missed It: Discount Rates in a Purchase Price Allocation: Understanding the nature and risk of expected cash flow This discussion summarizes the interrelatedness of the weighted average cost of capital and the weighted average return on assets within the context of a purchase price allocation for financial reporting purposes. Failure to understand this fundamental relationship can lead to inaccurate estimates of value for the acquired assets and, therefore, inaccurate reported asset values and amortization expense on the financial statements of the acquirer. The WACC can be viewed as a weighted average of the required rates of return for the individual assets of the acquired company. The selected intangible asset rates of return should be reviewed for reasonableness through a weighted average return on assets analysis. Understanding the nature and risk of the expected cash flow (of the enterprise and specific assets) is important to ensuring consistency throughout the analysis. Read more» The Asset-Based Valuation Approach: Common Analyst Misconceptions The first article in this series provided an introduction to valuation analysts (analyst) regarding the need to integrate and use the Asset-based Approach to value going-concern businesses and securities. This second installment addresses common analyst misconceptions regarding the use of the Asset-based Approach to value both asset holding companies and operating companies. Read more» QuickReadBuzz AARP Wants Prospective Clients to put Advisors on the Record The Retiree’s Cost of Care Barometer Managing the Unique Needs of Ultra-High-Net-Worth Clients

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January 25, 2018 |   NACVA  |   CTI  |     |

Lease Accounting 2018 Update Overview—Putting it on the Balance Sheet In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842).  The existing standard has been criticized because its bright line classification criteria enabled entities to structure leases in such a way as to avoid putting them on the balance sheet.  The new standard aims to improve and simplify the financial reporting for leases and create a model that provides for faithful representation of leasing transactions for both lessees and lessors.  This article summarizes the change. Read more»

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An Analysis of Discount For Lack of Marketability Models and Studies: Calculating Discounts Accurately Depends a Lot on Company Specifics. Here’s What You Need to Know Dennis Bingham and KC Conrad provide a thorough look at options for calculating a discount for lack of marketability (DLOM), including restricted stock studies, pre-IPO studies, theoretical and option pricing models, discounted cash flow (DCF), Mandelbaum factors, and more. Read more»

Developing Supportable Attrition Rates in Customer Relationship Valuations: Valuation of the Customer Base The value of the customer base is a function of attribution. Measuring percentage attribution requires access to internal data, and this data is often missing. Where it is available, the valuation professional can use the Constant Revenue or Revenue Decline Model. This article explains how these models are developed. Read more»

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Lessons to Learn from SEC Accounting and Auditing Enforcements SEC Should Define “Advisor,” Says CFA Institute This Time-Saving Trick Gets Advisors Fired.  Don’t do it.

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Which is Best: EV/EBITDA, EV/EBITA, or EV/EBIT? Adherence to Development and Reporting Standards in Family Law Litigation

When applied correctly, the Market Approach can link value to market evidence and help support a thorough and well-reasoned valuation.  However, valuation analysts often struggle with a variety of challenges when applying the Market Approach that include locating and selecting good comparable companies, selecting or calculating various valuation multiples from reported data, and weighting or selecting indications of value derived from various applied multiples.  Recently published research from Doron Nissim at the Columbia Business School at Columbia University NY may shed some light on the best measure of operating performance in the context of equity valuation and, thus, which measures may deserve more weight or consideration in deriving value.  All three enterprise value multiples (EBITDA, EBITA, and EBIT) perform reasonably well in explaining market valuations.  The superiority of EBITDA, however, in explaining equity valuations means this multiple should be given material consideration in any valuation using a relative valuation approach.

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