The American Institute of CPAs details the risks and opportunities for CPAs working in the cannabis industry in the latest “FVS Eye on Fraud” report. Along with these opportunities come serious downsides, as marijuana remains illegal at the federal level. The report offers a review of many of the State Boards of Accountancy positions on working in the cannabis industry and highlights some of the issues and challenges facing both the cannabis industry and CPAs supporting it. It also has some cautions about valuing a cannabis business, saying that apparently many of these firms are using the fair value accounting model, incorrectly assuming that the cannabis industry is akin to the agricultural industry. “Consequently, valuing the marijuana plants using this method does not take into consideration any other factors that could affect the ultimate sale of the product, such as economic factors, weather conditions, insects or other pathogens,” the report says. “In turn, this could lead to large writeoffs and disgruntled investors.”
Extra: For business appraisers who are valuing firms in the cannabis industry, The State of Legal Cannabis Markets, 7th edition, is available from ArcView, and there is a discount for BVR customers. If you use the discount code “BVR100,” you will receive a $100 discount. BVR also has two other resources: The Cannabis Industry Appraisal and Accounting Guide and What It’s Worth: Value and Business Challenges in the Budding Cannabis Industry.
Please let us know
if you have any comments about this article or enhancements you would like to see.