Alaska Supreme Court Accepts Calculation of Value as Well as a Range of Value

Well here we go again. Another court accepts a calculation of value in a litigation, and this time it has a problematic twist to it! he case is B.M. v. R.C., 2023 Alas. LEXIS 102 (Oct. 11, 2023). The Supreme Court of Alaska, the highest court in that state, in a divorce case, affirmed the Superior Court’s¹ acceptance of a calculation of value the wife’s valuation and forensic accountant submitted and testified to. But there was a twist to the calculated value submitted.

The calculated value presented a range of value instead of a specific single value. The expert² explained that he determined a range of values because “there are some issues with the underlying data.” He identified his high end as $1,753,261 and his low end as $824,679, for an average of $1,245,897. The trial court decided to use the average as the value for the determination of the marital estate. The expert stated that he did not know “the bullseye figure.” He further explained that the QuickBooks amounts did not agree with the tax return.

It was later discovered that the tax return amounts had been deliberately underreported and the husband filed amended returns for several years. Since we don’t have the trial court opinion, we cannot tell whether the wife’s valuation expert had this information available. 

All of the major valuation standards commonly used in the U.S. allow the use of a range of values. On the surface, then, that is not necessarily a problem. However, using a range instead of reconciling the difference between QuickBooks and the tax returns is disturbing. Perhaps the expert should have made an effort to reconcile the two. Failing that still begs the question as to whether it is appropriate to provide a range of value to solve the problem. Paragraph 30 of the AICPA BV Standards³ states that “[t]he valuation analyst should read and evaluate the information to determine that it is reasonable for the purposes of the engagement.”

Regardless, the trial court in this case accepted both the calculation of value and the range of value, and the supreme court affirmed it. A number of courts in a number of states have accepted calculations of value. It is up to the expert and the attorney to inform the court on what a calculation of value is and what its limitations are. It remains to be seen whether the modifications of Rule 702 clarify when a witness and their work product have applied a reliable methodology. Is a calculation of value a reliable methodology? Stay tuned.

¹ The Superior Court was the trial court in this case.

² The expert was not named in this case, nor were his (he was gender identified) credentials listed. The parties were referred to by their initials. This was by request of the parties to the court, which granted their request.

³ Statements on Standards for Valuation Services; VS Section 100; Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset.