Analyst guidelines for bankruptcy valuations

BVWireIssue #139-2
April 9, 2014

As bankruptcies have become more complex and bankruptcy proceedings have become more contentious, the scope of valuation analyst professional services has expanded. In their book, A Practical Guide to Bankruptcy Valuation, Robert Reilly (Willamette Management Associates) and Dr. Israel Shaked (The Michel-Shaked Group) present their top 10 valuation analyst guidelines when working on a bankruptcy assignment.

Know your assignment: One of the guidelines points out that the analyst should understand and document all of the elements of the bankruptcy valuation assignment. The elements of the valuation assignment are typically described in the statement of the purpose and objective of the bankruptcy valuation. Before the start of the engagement, the analyst should understand the following elements of the bankruptcy valuation:

  • The valuation subject (what debtor businesses, assets, or securities are the subject of the analysis);
  • The subject ownership interest (this is typically, but not always, a fee simple ownership interest);
  • The appropriate standard of value (this is typically, but not always, fair market value);
  • The appropriate premise of value (this is typically, but not always, value in continued use as a going concern); and
  • The appropriate valuation date (unless purely determined by law(s), the analyst should understand why the selected date is relevant to the bankruptcy proceeding).

See the entire list: For the rest of the guidelines, see “Top 10 Analyst Guidelines for Bankruptcy Valuations,” which BVR is pleased to provide as a free download.

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