At the recent ASA Advanced Business Valuation Conference in Houston, Andrew Fargason (Stout Risius Ross), a member of The Appraisal Foundation’s third working group that is developing best practices for control premiums, told the audience that the final document will be published before the end of this year. It will be VFR Valuation Advisory #3, dealing with the measurement and application of market participant acquisition premiums (MPAP) in the context of fair value for financial reporting. It does not address premiums in other contexts, such as tax or disputes. The fundamental perspective of the working group is that a premium for control is not always warranted. Also, the group recognizes an ongoing need for benchmark data, but they should not be used as the sole input for the estimation of a premium. Auditors (who follow TAF advisories) will scrutinize comparables much more closely in the future.
The previous two Valuation for Financial Reporting (VFR) advisories are:
A fourth working group is developing a VFR on valuing contingent consideration.
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