Defining Terms: Forecasts v. Projections—Why Does It Matter?
One area that can trigger some confusion is the difference between the terms “forecast” and “projection.” Some people use them interchangeably, but these are formal terms found in the literature, so they should be used appropriately.
Business Valuation’s ‘Dirty Little Secret’
Recent developments have put the spotlight squarely on projected financial information (PFI). The perception is that too many valuation experts simply accept projections and forecasts they’re given without applying enough scrutiny—or any scrutiny at all. Fortunately, there is some new guidance on how to examine and substantiate PFI you get from management or other third parties in BVR’s new Guide to Management Projections and Business Valuation: Analysis and Case Law. The following is an excerpt from that chapter.
Four questions you must always ask about PFI
There are many things to consider when evaluating prospective financial information (PFI), and much of it can be boiled down to four questions you should be asking, according to the just-released BVR Guide to Management Projections and Business Valuation: Analysis and Case Law.
Another wrinkle in the Brundle ESOP case
Although the district and appellate courts in the landmark Brundle ESOP case ruled years ago against the trustee, Wilmington Trust, litigation related to the case is not over.
Two new resources from BVR
Just released!
BV News and Trends May 2021
A monthly roundup of key developments of interest to business valuation experts.
Tax Court issues highly anticipated ruling in Michael Jackson case
In the long-running litigation between the estate of the late megastar Michael Jackson and the Internal Revenue Service, the U.S. Tax Court recently issued its opinion on the value of Jackson’s image and likeness, as well as the value of his interest in two music publishing assets. Overall, this much-anticipated decision is a major win for the Jackson estate. The court’s momentous decision includes an expansive analysis of the rivaling valuation testimony.
Estate of Michael J. Jackson v. Commissioner
Tax Court mostly sides with estate of late superstar in valuing three contested assets; assets had to be valued separately, based on parties’ stipulations, and at death; court says Jackson’s “tattered” image and likeness meant he earned little money apart from his music; court rejects tax affecting.
Tax Court Hands Jackson Estate Major Win but Finds Reasoning for Tax Affecting Unpersuasive
Tax Court mostly sides with estate of late superstar in valuing three contested assets; assets had to be valued separately, based on parties’ stipulations, and at death; court says Jackson’s “tattered” image and likeness meant he earned little money apart from his music; court rejects tax affecting.
Exploring Excel Functions That Help With Business Valuations
Several Microsoft Excel functions are already available in most modern versions of the program that many valuation experts are unaware of. If you use Microsoft Excel for any sort of process, the use of certain functions can make your templates more accurate and allow you to complete an analysis quicker. Join valuation expert and Excel guru Shawn Hyde to learn about setting up dynamic text, which means typing a sentence in a cell in an ...
Global BVU News and Trends March 2021
Business valuation news from a global perspective.
Using a Discounted Cash Flow Methodology in Uncertain Times
A fundamental look at the method taking center stage during the pandemic. This article outlines how the DCF method works and to highlight the nuances and trap doors that will be encountered and must be overcome to reliably apply the method to derive an indication of value that is well reasoned and supportable for the application intended.
Valuing Enterprise Cash Flows
The integrated theory of business valuation provides a conceptual framework for disciplined analysis of valuation questions. Too often, valuation analysts are tempted to view individual components of a valuation assignment on a piecemeal basis. Adhering to the integrated theory helps valuation analysts develop base valuation conclusions, discounts, and premiums that are rooted in a shared perspective of the subject company and the subject ownership interest. In Part 1 of the series, Chris Mercer and Travis ...
Blast from the past on forecasting
During a recent BVR webinar, Josh Shilts (Shilts CPA PLLC) mentioned a helpful article that appeared in the Harvard Business Review (HBR), “How to Choose the Right Forecasting Technique.”
Forecasting: Removing Rose Colored Glasses
Projections are commonly relied on for business valuations, lost profits analyses, reorganization plans, and a host of other projects within litigation. Using forensic accounting analysis, the speaker will address “rose-colored” projections and how to work with them. Expert Josh Shilts will discuss how to increase confidence levels of projections using macro and micro market data along with statistical analysis.
Top Expert Answers for Today’s Tough BV Questions
In BVR’s recent webinar, Power Panel: Live Expert Answers for Today’s Tough BV Questions, experts Jay E. Fishman, Michelle Gallagher, Ken Pia, and Jeffrey Tarbell covered various hot topics that affect the business valuation profession. These questions ranged from the basics, such as “What will 2021 look like?” to “What are your thoughts on the current state of the ESOP litigation environment particularly with the new administration coming in?” Here, we summarize five of the questions and answers. For more information, be sure to check out the complete recording and transcript of the session.
Adjusting the Income Approach Highlights AICPA FVS Conference Panel
A panel at the AICPA FVS Conference fielded a barrage of audience questions about how to help make sure the income approach captures the impacts of the current environment. The panel, moderated by Jim Hitchner (Financial Valuation Advisors), included Lisa Cribben (Wipfli LLP), Harold Martin (Keiter), and Mark Zyla (Zyla Valuation Advisors LLC).
BVU News and Trends January 2021
A monthly roundup of key developments of interest to business valuation experts.
Global BV News: PFI featured in latest OIV Journal
The latest edition of the journal of the Organismo Italiano di Valutazione, the valuation standards-setter in Italy, is now available if you click here.
Little-Known Resource Can Help Bolster Support for Projections
Projections used in business valuation have always been subject to scrutiny—and now more than ever. During the recent ASA International Conference, it was pointed out that many valuation analysts may not know of a resource that can be used to help support their assessment of projections.
In re Kinser Group LLC
In § 506(a) hotel valuations, bankruptcy court finds creditor’s experienced expert premised appraisals on “fundamentally flawed” base assumption that hotels would be sold on the valuation date, where debtor’s plan said debtor would retain and operate hotels; court said replacement value applied.
Expert’s Failure to Review Debtor’s Reorganization Plan Results in ‘Defective’ Hotel Appraisals
In § 506(a) hotel valuations, bankruptcy court finds creditor’s experienced expert premised appraisals on “fundamentally flawed” base assumption that hotels would be sold on the valuation date, where debtor’s plan said debtor would retain and operate hotels; court said replacement value applied.
Interesting poll results in latest Hitchner pub
The latest issue of Hardball With Hitchner includes the results of some recent polls that reveal what valuation practitioners are doing to reflect the impact of COVID-19 in valuations.
Global BVU News and Trends November 2020
Business valuation news from a global perspective.
Solvency opinion based on management projections faces Daubert challenge
In a bankruptcy-cum-Daubert case that turned on solvency, a court recently rejected both parties’ claims that the opposing financial expert testimony was inadmissible.