More fair value advice from ASA conference

BVWireIssue #177-2
June 14, 2017

In last week’s issue, we gave you some takeaways from the ASA’s 12th Annual Fair Value Conference in Los Angeles. Here are a few more.

  • When valuing earnouts with a linear payoff structure, use a scenario-based model; if nonlinear, use option pricing models, advise Gary Raichart (Duff & Phelps) and Sorin Maruster (KPMG). The two speakers discussed the exposure draft that was issued this past February for a proposed guide on valuing contingent consideration. Comment letters are being reviewed and a final version will come out soon.
  • It will be a “new world” under FASB’s “Definition of Business” rules, which start to kick in next year, said Adam Smith (PricewaterhouseCoopers). Under these new rules, you’ll see more asset acquisitions in the future and fewer business combinations. Because of this, a company’s workforce value will be under increased scrutiny because it must be recognized in an asset acquisition.
  • If you want to help guide the development of international valuation standards for financial instruments, the IVSC is taking applications, announced Kevin Prall, the IVSC’s technical director for business valuation standards and also a senior manager at KPMG LLP. The IVSC is looking for members for its new Financial Instruments Board and supplemental members to the Standards Review Board. The application process closes on July 1.
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