Five things to know from the ASA fair value conference

BVWireIssue #219-1
December 2, 2020

fair value for financial reporting
american society of appraisers (ASA), ASA, fair value, fair value measurements, conference

There was a vast attendance at the ASA’s Fair Value Virtual Conference, held November 18, with registrants from over 70 firms nationwide and six countries, including Australia, Bermuda, Mexico, Romania, Saudi Arabia, and Singapore. Top-notch speakers with substantial experience conducted sessions on very interesting and current topics—much of which are applicable in areas other than fair value for financial reporting. Here are some takeaways:

  • Two-thirds of attendees say they have seen an increase of fair value work since the onset of COVID-19, mostly in the area of impairments, but many say the increase comes from a combination of impairment work plus services related to stock-based compensation, portfolio updates, and long-lived assets;
  • You need to dig deeper into market data when assessing the impact of the pandemic; for instance, the consumer discretionary sector is doing much better than the overall market even though it contains hard-hit businesses such as movie theaters and cruise lines;
  • In today’s environment, cost of capital inputs need to be forward-looking; otherwise, you will likely end up with a rate that doesn’t make sense;
  • A poll of the audience reveals that 18% adjust the company-specific risk premium to reflect the incremental risk of the pandemic and another 18% rely on scenario analysis—almost half use a combination of those methods along with sensitivity analysis and Monte Carlo; and
  • Speaking of company-specific risk, guidance is in the works from The Appraisal Foundation on best practices—watch for a survey to be sent out soon.

Full coverage of the conference will be in the January issue of Business Valuation Update. Sessions included a current issues panel, the impact of recent court cases on the fair value of technology, an update on The Appraisal Foundation’s valuation advisory on best practices in the application of company-specific risk premia, a regulatory update, and much more.

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