06
/ January
2010
Divorce court says SSVS-1 is not binding
During the divorce of the California Devries, a court-appointed forensic accountant valued the husband’s construction business under the excess earnings and capitalization of earnings approach, determining no goodwill value. Using three months of past gross profits, however, the expert came up with a goodwill value of $100,000, which the court adopted in addition to a $750,000 asset value. The husband appealed, claiming that the expert’s use of a three month’s rule of thumb violated Standard 39 of the AICPA’s valuations standards (SSVS-1), which provides that rules of thumb “should generally not be used as the only method to estimate the value of the subject interest.”