Remember the heated discussion in the BVWire regarding when, if ever, CPA experts could submit calculations of value in divorce cases? Well, a recent decision may have just proved that analysts such as Gary Trugman (Trugman Valuation Associates), Ron Seigneur (Seigneur Gustafson), and Stacy Collins (Financial Research Associates) were right all along. In a case concerning the husband’s interest in a small chain of family-owned dry cleaning stores, the family’s CPA estimated the businesses were worth anywhere from $71,000 to a negative $120,000. His calculations were based on industry “rules of thumb” that were commonly used, he said, but that didn’t require the same professional judgment as a complete valuation. After the trial court valued the businesses based in large part on the CPA’s figures, the wife appealed—and the appellate court agreed, finding “we do not use [the CPA’s] calculations because he admittedly did not “use judgment.”  The CPA’s calculations also failed to account for the effect of family ownership on the business value—which were “paramount” in this case.

Read the complete case digest of In re Marriage of Hagar, 2010 WL 4807559 (Iowa App.)(Nov. 24, 2010) in the Feb. 2011 Business Valuation Update; the court’s decision will be posted soon at BVLaw.