BVWire traveled to Music City for the AICPA’s Forensic and Valuation Services (FVS) Conference. Welcoming the crowd of over 1,000 attendees were conference chairs Stacey Udell (Gold Gerstein Group LLC) on the valuation side and Annette Stalker (Stalker Forensics) on the forensics side. Randie Dial (CliftonLarsenAllen) conducted an early session designed to point attendees to specific sessions geared to top issues, including family law, fair value (particularly the new CEIV™ credential), DLOM, damages (including construction, an area ripe for damages claims), the proposed Section 2704 regs, and updates on case law.
Annual update: AICPA staffers from the FVS section, including vice president Jeannette Koger and senior manager Eva Simpson, gave an update on the year’s activities. Among other items, a Practice Aid on bankruptcy and reorganization services was added to the FVS resources library. In terms of the ABV credential, 164 new credential holders were added during the year and there was a 98% retention rate for existing credential holders. A major accomplishment was the development of the new credential for fair value for financial reporting for U.S. publicly traded companies, Certified in Entity and Intangible Valuations™ (CEIV™). The AICPA, ASA, and RICS have spearheaded this effort, and the credential will be made available as soon as the Mandatory Performance Framework is finalized, which is imminent. CEIV™ education and the exam have already been developed. A second credential, with the working acronym of FI (Financial Instruments), is also being developed and is “well underway,” the AICPA says.
The AICPA presented its Business Valuation Volunteer of the Year Award to Stacy Preston Collins (Financial Research Associates) and its Forensic & Litigation Services Volunteer of the Year Award to Scott Bouchner (Berkowitz Pollack Brant Advisors and Accountants LLP).
Then it was on to the regular sessions! Here are just a few takeaways we picked up during the three-day event:
- Projections are valuation’s “dirty little secret,” said Jim Hitchner (Financial Valuation Advisers). Too many appraisers simply accept the projections the client provides, plug them into a discounted cash flow analysis, slap a discount rate on, and are done with the analysis. A conscientious appraiser examines the original projections and, if necessary, challenges the client on them.
- An interesting session on detecting the truth in management interviews pointed out that Bill Clinton and Al Gore both had the same speechwriter, but Clinton was viewed as much more truthful. Reason: Body language. Pay attention to it when querying management.
- An issue that comes up often but the valuation analyst does not always address is economic obsolescence, said Gary Trugman (Trugman Valuation Associates Inc.), who wrote an article on the topic in the September 2016 issue of Business Valuation Update.
- When forecasting cash flow for a music artist’s work, make sure you ask about unrecouped advances—money the artist often receives upfront from his or her record label, said Roy Salter (FTI Consulting). If the advance is large, there may be no cash flow for a while.
- The Mandatory Performance Framework for the new fair value credential (CEIV™) is not creating more work but rather making sure you adequately document your work and thought processes, said Mark Zyla (Acuitas).
- All DLOM methods have "warts." Knowing what they are is key to supporting your opinion, said Jim Alerding (Alerding Consulting LLC) and Pat Rafanelli (Grassi & Co.).
- Using an outside provider to do the industry analysis part of a report saves a lot of time. One provider is Blue Sage Research, and speakers presented an example of this provider’s work.
- Social media could be the “big disruptor” in the FVS profession, but a lot of practitioners are not using it.
We’ll provide more coverage in a future issue. Next year’s FVS conference will be at Caesar’s Palace in Las Vegas.
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