Is Rev. Ruling 59-60 a thinly disguised road map for intrinsic value?


Warren Buffett’s name just came up at the recent AICPA/AAML conference, too. In his session on bridging the appraisal wars, Z. Christopher Mercer (Mercer Capital) reminded attendees that the oft-quoted investment tycoon believes that “intrinsic value” is an “all-important” concept that is the “only way to make an investment decision,” Mercer said, because it measures the discounted value of the cash that can be taken out of the business during its remaining useful life. Or, as the ASA BV Standards define it, intrinsic value is the “real” or “true” value that will “become the market value when other investors reach the same conclusion.”

Remember, if you don’t have objective market data, added co-presenter Richard Orsinger (McCurley Orsinger Nelson & Downing), IRS Revenue Ruling 59-60 directs appraisers to use the intrinsic value standard. In fact, Orsinger believes that Rev. Ruling 59-60 “applies a road map for intrinsic value under the rubric of fair market value.”


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