In the last BVWire, we reported on some interesting bits of information we picked up while attending the AICPA Forensic & Valuation Services Conference 2013 in Las Vegas. Here are a few more:
Let’s get our act together, urged one speaker, who pointed out that valuation analysts are not using a consistent and defined set of terms. Example: The term “alpha” is now being tossed into modified CAPMs and build-up modelsâ€”but the definitions of the term are all over the place.
No discount for lack of control should be applied if there’s just the mere possibility that something may change down the road, argued one panelist at a session on valuing minority interests. Another panelist said his firm automatically takes a small discount for lack of control. But the first panelist disagreed with this method, finding it “too speculative.”
ESOP opportunities for CPA valuators are in serving as a financial advisor to the CPA’s audit clients that may be considering an ESOP. These services can result in a happy client and a lucrative add-on engagement for a CPA firm. One piece of advice for them: It’s important to select an independent trustee versus, say, the owner’s golf buddy. There are third parties who will do this.
An updated practice aid for business valuation in bankruptcy is in the works at the AICPA. Expected in the first quarter of 2014, it will have eight new sections, will be updated for new GAAP, and will have an increased focus on valuation issues specific to distress situations.
Add annual rate change language to your engagement letters, advised one speaker. If an engagement lasts for years, you don’t want to miss out on the increase.
Use common sense when looking at the results of your valuation was a common theme from several speakers in a number of different sessions. When all is said and done, step back and simply ask yourself: “Would I buy this business at that price?” “Would I be willing to sell this asset at that amount?” If you answer “no,” rework the analysis because you goofed somewhere.
We’ll have details on these and other issues raised at the conference in a future issue of Business Valuation Update.
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