The Appraisal Foundation’s third Working Group is currently developing best practices guidance on the application of control premiums in financial reporting. Prior to releasing an Exposure Draft, the Group is soliciting broad input from the BV community on a key discussion questions regarding the assessment and measurement of control premiums, including:
- Should you adjust an observed, publicly traded market share price to reflect a control fair value?
- Is it ever appropriate to apply a negative control premium to the publicly traded share price?
- What is the most appropriate method for calculating the control premium: the equity method, total invested capital method, cash flow method—or some other?
- When using comparable transactions, what qualitative and quantitative techniques are appropriate to refine the raw data and select the appropriate premium?
Submit comments by mail, fax, or email to: Working Group 3—Control Premiums, c/o Paula Douglas Seidel, The Appraisal Foundation, 1155 15th Street N.W., Suite 1111; Washington, D.C.; 202.347.7727 (fax); firstname.lastname@example.org. The deadline is January 15, 2010.
ASA is also working on guidance: The American Society of Appraisers (ASA) is also developing a best practices paper on valuing partial interests, including the application of control premia. Eric Nath, who’s helping to spearhead the ASA effort, says “there’s a whole lot more complexity to think about than most folks realize.” Stay tuned…
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