Hot-button issues presented at NYSSCPA BV conference

BVWireIssue #201-1
June 5, 2019

valuation profession news
damages, business valuation profession, cost of capital, NYSSCPA, valuation practice management, size effect, cash flow projections

Cryptocurrency, financial projections, and inputs into the cost of capital were just a few of the important topics discussed at the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 20 in New York City. BVWire attends this event every year, and there is always something interesting to learn. Here are a few takeaways from the sessions:

  • Initial coin offerings (ICOs) are being used to fund startups instead of traditional venture capital; investors buy tokens that are also being issued to employees; valuation is tricky as there is no company yet, just an idea;
  • More professional scrutiny is needed over financial projections management provides—and don’t assume that a highly detailed projection is automatically reasonable;
  • It’s important to consider a start date for historical return data behind a cost of capital estimate; you need to choose the part of history that you believe best represents investor expectations of the future;
  • Automatic usage of a size premium is giving way to more thought; recent research reveals that the size effect is conditional and more complex than the simple notion that smaller firms have higher returns than larger ones;
  • Becoming an “authority” on an aspect of valuation is key to scaling a practice;
  • Economists don’t generally clash with financial experts; they are in sync except when differences arise over matters of fact;
  • Option pricing models are evolving as the primary way to value contingent consideration; and
  • Computers and artificial intelligence can be your best friend or your worst enemy—it’s what’s between your ears that really counts.

Our congratulations to the conference organizers Mitchell H. Chosak (Forfeiture Support Associates LLC) and Jean J. Han (Baker Tilly Virchow Krause LLP) for another excellent event. The July issue of Business Valuation Update will have more details on the topics presented.

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