Hitchner goes after another BV myth

BVWireIssue #254-2
November 8, 2023

valuation methods & approaches
AICPA, valuation standards, subsequent events

Does the concept of “known or knowable” live up to its name? No, says Jim Hitchner (Financial Valuation Advisors) in his November issue of Hardball With Hitchner. The concept is not as known or knowable as it should be, he says. Hitchner has taken on this concept as his latest myth-busting effort. He’s done several of these before, but, with this one, he’s enlisted a group of AICPA BV Hall of Famers (click here for our prior coverage).

The problem: To Hitchner’s “complete surprise,” the AICPA is the only business valuation group that deals directly with the “known or knowable” concept in its standards. “This is a problem that I believe should be rectified, as this can be an area of abuse in business valuation,” he writes. He goes on to “shed some light on this important concept” by examining what is said about it in IRS Rev. Rul. 59-60, the AICPA BV standards, the AICPA Subsequent Events Toolkit, and some dictionary definitions.

We point out that, in addition, all the main business valuation books (Pratt, Trugman, Hitchner) and others discuss the concept. Trugman’s book, Understanding Business Valuation, 6th edition, has a nice section on it and also has a listing of treatises and court cases. Also, we did a search on BVResearch Pro of the phrase “known and knowable” and got 253 hits, including articles, webinar transcripts, court cases, and more going all the way back to 1996. As you can see, there’s a lot of material about the “known or knowable” concept.

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