Four Faces of Fair Market Value
|
|
- Janis Joan Bates
- 5 years ago
- Views:
Transcription
1 Four Faces of Fair Market Value By Grover Rutter, CPA, ABV, CVA, BVAL That person is two-faced! I remember the very first time I heard that expression. With only five years of experience in this world, my mind conjured up the caricature of a humanoid monster with two faces. The face on the front of the head was recognizable as that of a normal human being. The imagined leathery-tough and contorted facade of the rear face was more than enough to frighten the bejeebies out of this five year old. And most horrible of all, was the fact that whenever I garnered the nerve to actually try and sneak a peak at the back of some two-faced person s head, it looked just like any other person s head! How could the grown-ups recognize these two-faced people? In not too many years, life s experiences taught me some important lessons. Soon, I realized that two-faced was merely a figurative expression while the turmoil surrounding the actions of a twofaced person could be quite literal. The above scenario can also be analogous with the term fair market value. In business valuation fair market value is a phrase used quite frequently by a host of interested parties. The Internal Revenue Service, other governmental organizations, civil litigants, their attorneys, and judges all struggle with the task of identifying fair market value. This fact is easily documented by the voluminous number of court cases dealing with the subject. It is easy to identify fair market value when an actual arm s-length sale or transaction occurs between willing and able buyers and sellers. However, in situations where an arm s length sale will not occur, fair market value is an elusive monster that can easily camouflage itself amongst facts, figures, and fictions. In those non-sale situations, everybody talks about fair market value but very few recognize it. 1 Unfortunately, this is also true of some business valuators. This article is intended to assist in the identification of fair market value, which I refer to as the fourfaced monster. Learning to recognize the key elements (faces) of fair market value will assist valuators and users of valuations in identifying the fair market value of most equity/investment interests when an actual sale of the interest in not anticipated. For simplicity, I have organized the four faces of fair market value into two categories. Each category contains two elements. The first category is the Standards Category, while the second category is the Participants Category. The following discussions examine the four faces of fair market value. Also, I am providing some actual examples of arguments that have been made by valuators on different sides of the fair market value question. Standards Category Two separate definitions can generally apply to the standard of fair market value. Some states and jurisdictions may also have statutory definitions of fair market value. However, for purposes of this article, I am assuming a lack of jurisdictional statutory definition. In the absence of such statutory definition, the two general standard definitions are provided by Revenue Ruling International Glossary of Business Valuation Terms. While the definitions provided by each of these authoritative sources are similar, the strict literal adherence to either definition can cause different results under each definition. Let s take a closer look at each definition. 14
2 Revenue Ruling Definition This is probably the most common definition of fair market value and the one discussed most often. Revenue Ruling defines fair market value as:... the amount at which the property would change hands between a willing buyer and a willing seller when the former is not under compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts. This definition is commonly used by the IRS, the courts, and valuation consultants. It assumes a hypothetical arm s length sale without regard to a specific buyer or seller. This definition is what I consider as the first face of fair market value. International Glossary of Business Valuation Terms Definition Jointly approved by the AICPA, ASA, Canadian Institute of Chartered Business Valuators (CICBV), NACVA, and IBA, this Glossary of Business Valuation Terms provides some slight variations to the old definition of fair market value as set forth by Revenue Ruling The International Glossary defines Fair Market Value as The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. (te: In Canada, the term price should be replaced with the term highest price. ) I consider this definition as the second face of fair market value. So, what is the difference between the two definitions that can cause valuators to arrive at different results under each definition? A practical observation is that the primary difference is the phrase expressed in terms of cash equivalents that can be found in the definition provided by the International Glossary of Business Valuation Terms. While this appears to be only a slight variation, it can often be the cause of heated debates between litigants, their attorneys, and business valuators. Here is an example that I recently encountered. The business valuator engaged by the out-spouse prepared a valuation of the subject accounting firm using the Fair Market Value standard established by Revenue Ruling 59-60:... the amount at which the property would change hands between a willing buyer and a willing seller when the former is not under compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts. The valuator acknowledged within the report that accounting firms are quite often sold on an earnout basis. That is, the gross sales price paid for the firm will be paid over a set period of time (generally from three to five years) based upon some percentage of fee revenues generated by the firm. However, in his valuation, the valuator opined the fair market value as being an amount based upon a multiple of anticipated firm revenues. The valuator did not consider or discuss the prospect that the actual sales price (based upon his calculations using multiples) may be paid over a number of years. In essence, the valuator did not consider or discuss the present value of the transaction. 15
3 What was his defense to the approach of not recognizing the present value? He said, I relied upon the literal definition of fair market value as established by the Internal Revenue Service in Revenue Ruling 59-60:... the amount at which the property would change hands between a willing buyer and a willing seller when. My conclusion represents that amount for which the property would change hands. The standard s definition imposed no further requirement. The out-spouse s valuator did not mention it, but many business brokers also think of value in terms of transaction values, where the total of all consideration passed at any time between the buyer and seller for an ownership interest in a business enterprise represents the value. 2 My engagement was with the attorney for the in-spouse, and I also used the fair market value standard. However, the standard on which I relied was the definition of fair market value as provided in The International Glossary of Business Valuation Terms: The price, expressed in terms of cash equivalents, etc. In addition to other methods, my valuation analysis also considered price to revenue multiples for accounting firms. In fact, the other valuator and I used the same data and price multiples in our calculations. However, citing the earn-out method that is frequently used in the sale of CPA practices, I set forth an assumption of a 25% down payment with the balance to be paid over five years based upon assumed even collections (no indication that gross collections would decrease). I converted the expected stream of collections into a present value using the mid-term Applicable Federal Rate (a published rate) that had been in effect for the valuation date. Of course, my indication of value based on this market approach was lower than the indication of value calculated by the other valuator. We both contended that the definition of fair market value, on which we each relied, supported our findings! In the foregoing situation, the parties attorneys argued back and forth about the valuation issues, filed motions, and went through the standard legal procedures that stall cases and drive clients to insanity! Finally, the attorneys convinced their respective clients that compromise was the best answer, and the issue was settled by the parties using a simple average. How might business valuators assist attorneys and their clients in avoiding some of the pitfalls in issues concerning fair market value? The answer may sound too simple. First, seek the exact legal definition of fair market value in the jurisdiction. If there is no established statutory authority or case law that specifically defines fair market value, then why not suggest the parties consider stipulating to the exact definition of the valuation standard to be used? Do the parties agree to adhere to the older Revenue Rule definition, or the newer International Glossary of Business Valuation Terms definition? This takes some additional effort on the part of the business valuator; educating attorneys as to the subtle differences between the two definitions of fair market value may be time well spent. The table on the following page allows us to compare the basic defined requirements of fair market value: 16
4 Comparison of Requirements Requirements Rev. Ruling Glossary of Business Valuation Terms Hypothetical Seller Required? Hypothetical Seller Willing? Hypothetical Seller Able? Seller under Compulsion? Seller: Knowledge of Facts? Seller: Acting at Arms-Length? Seller: Open & Unrestricted Market? Seller: Seeking Strategic Buyer? 3 Hypothetical Buyer Required? Hypothetical Buyer Willing? Hypothetical Buyer Able? Buyer under Compulsion? Buyer: Knowledge of Facts? Buyer: Acting at Arms-Length? Buyer: Open & Unrestricted Market? Buyer: Can Buyer Be a Specific Buyer? 4 Is Price Expressed in Terms of Cash Equivalents? Implied Implied Participants Category The next two faces of fair market value concern the seller and the buyer. I refer to the seller and buyer as having the third and fourth face of fair market value, respectively. In the definition of hypothetical fair market value, a valuator must consider the positions of EACH the seller and the buyer. I don t know how many times I have reviewed business valuation reports (claiming to render an opinion of value based upon the Fair Market Value Standard ) that devote page after page of discussion, analysis, and calculations dealing with the hypothetical buyer. In some reports I have seen nothing at all mentioned about the considerations of the hypothetical seller! In my opinion, such reports may be opining an investment value rather than a fair market value. Why? Because the valuator was concerned only with the value to the purchaser! Yet, the valuator will swear up and down that the value represents fair market value! So, what is hypothetical fair market value, and how is it recognized? Both of the previously mentioned standards give us a definition of fair market value. But the trick seems to be in implementing the analysis leading up to the conclusion of fair market value. This is where I refer to recognizing the third and fourth faces of fair market value. To assist the reader of my reports to follow my logic, I have added a paragraph right below the definition of the standard being used (I have been using the FMV definition prescribed by the International Glossary of Business Valuation Terms). This additional paragraph further explains the basic characteristics of both the seller and the buyer: The concept of hypothetical Fair Market Value is one involving the determination of a range of values, with the hypothetical Fair Market Value falling somewhere within that range. The low end of the range is the lowest amount that a willing seller, who is seeking the highest amount, will accept and still consummate the transaction. The high end of the range is the maximum amount that a willing buyer, who is seeking to pay the lowest amount, will pay and still consummate the transaction. Then, in the Valuation Methods section of the report, further discussions can also address those methods that may be considered by the seller and the purchaser, and the reasons why each may consider a 17
5 particular approach or method. We must remember that the hypothetical seller is not being forced to sell, and the hypothetical buyer will only enter into the transaction up to the point where the price no longer makes sense to that buyer. Failure to examine the faces of both parties may indicate the valuator s failure to meet the requirements imposed by the Fair Market Value Standards. The table on the next page is intended to assist users of valuation reports in identifying the faces of the hypothetical seller and buyer, respectively. The items listed within the table may not be allinclusive and are intended to give the reader an idea of the general considerations that attach to the seller and also to the buyer. continued on next page... 18
6 Attributes of Hypothetical Sellers and Hypothetical Buyers Hypothetical Seller GOALS Willful Sale 1 Maximum Price Success of Buyer Collect Full Price (Endnotes) 1 See citations at 3 and 4 above, and continuing, However, the seller (hypothetical) must be willing to sell under conditions that exist as of the valuation date. SELLER WILL: Keep Business Going Analyze Valuation Scenarios Assist in Transition t Compete Assist Employee Retention Provide Some Training Provide Assistance Speak Well of Buyer Assist in Maintaining GW SELLER WON T: Refuse to Sell Close Business Frighten Buyers Compete Next Door Steal Employees Refuse to Train Refuse to Assist Bad-Mouth Buyers Bad-Mouth Business POSSIBLE VALUATION METHODS Market Approaches Asset Approaches Income Approaches COMMENTS P/R Multiples may provide higher valuations if earnings are lower than in the industry. Depending upon business type, seller may place higher values on tangible and intangibles. Seller also interested in tax consequences. Generally when the business generates higher than average earnings in industry, seller may rely more heavily on Income Approaches. Also, direct capitalization rates should be representative of the current market place. Hypothetical Buyer GOALS Willful Purchase Lowest Price Achieve Set Goals Pay for Purchase Possibly, Enjoy ROI BUYER WILL: Analyze Feasibility Perform Due- Diligence Analyze Valuation Scenarios Seek Assurances from Seller Seek Assistance from Seller May Seek Seller Financing Negotiate Price to some point BUYER WON T: Breach Confidentiality 1 Make Threats 2 (Endnotes) 1 In the hypothetical willing buyer scenario, specific buyers are generally excluded. Thus, while certain unfriendly buyers may leak information, or make economic threats, etc., we do not generally consider such specific buyers in the hypothetical setting established by the FMV standards. 2 Ibid, 6 above. POSSIBLE VALUATION METHODS Income Approaches Asset Approaches Market Approaches COMMENTS Buyers are concerned with cash flow, ability to finance the acquisition, and ROI issues. A DCF method may be expected. Also, the purchaser may consider using discount rates based on the purchaser s cost of capital and risk perceptions. Purchasers may be interested in values of under-lying assets, collateral issues, and tax considerations. Anticipate Seller Get Market Feel Anticipate Bids Determine Limits continued on next page... 19
7 In conclusion, valuators and users of valuation reports will find that identifying hypothetical fair market values may be much easier when each of the four faces can be identified: Summary of the Four Faces of Fair Market Value First Face Second Face Third Face Fourth Face Is the Standard of Fair Market Value set by Rev. Rule (may not be adjusted for present value considerations)? Is the Standard of Fair Market Value set by definition provided in the International Glossary of Business Valuation Terms (considers cash equivalents)? Have the hypothetical seller s positions and concerns been considered in the valuation analysis? Are those considerations consistent with what one could expect from a seller of the interest? Have the hypothetical purchaser s positions and concerns been considered in the valuation analysis? Are those considerations consistent with what one could expect from the purchaser of the subject interest? Just be thankful that I did not title or model this dissertation on the famous TV star that allegedly has sixteen personalities! Grover Rutter, CPA, ABV, CVA, BVAL, devotes 100% of his practice to business valuations and litigation support services. Grover is a frequent contributor of articles to and has also had articles published in other legal and business valuation publications. Grover is based in Findley, Ohio, and provides valuation, litigation support, and consulting services throughout the United States and in the British West Indies. He is a member of NACVA, IBA, AICPA, OSCPA, and AICPA Consulting Division, and the OSCPA Small Business Section. He can be contacted at gruttercpa@aol.com or His website address is www. gruttercpas.com. (Endnotes) 1 In situations where an actual sale is not expected to occur, I will refer to hypothetical fair market value in various sections of the article. This is done because the definitions of fair market value discuss hypothetical willing and able sellers and buyers. 2 The transaction value has been adopted by the International Business Brokers Association (IBBA), and the full definition can be found in the Business Brokerage Glossary. 3 Valuing Small Businesses & Professional Practices (Third Edition) by Pratt, Reilly and Schweihs, page 39, In the legal interpretations of fair market value, the willing buyer and willing seller are hypothetical persons, dealing at arm s length, rather than any particular buyer or seller. In other words, a price would not be considered representative of fair market value if it is influenced by special motivations not characteristic of a typical buyer or seller. 4 Valuing Small Businesses & Professional Practices (Third Edition) by Pratt, Reilly and Schweihs, page 39, That is not to say, however, that the concept of fair market value precludes identifying groups of willing participants. Quite the contrary, the valuator (spelling corrected) should be able to identify categories of willing purchasers. 5 See citations at 3 and 4 above, and continuing, However, the seller (hypothetical) must be willing to sell under conditions that exist as of the valuation date. 6 In the hypothetical willing buyer scenario, specific buyers are generally excluded. Thus, while certain unfriendly buyers may leak information, or make economic threats, etc., we do not generally consider such specific buyers in the hypothetical setting established by the FMV standards. 7 Ibid, 6 above. 20
Explaining The Alphabet Soup: Business Appraisal Designations What They Mean and How Difficult They Are To Obtain
Explaining The Alphabet Soup: Business Appraisal Designations What They Mean and How Difficult They Are To Obtain Paul R. Hyde, EA, CBA, BVAL, ASA The business appraisal profession is unusual. There are
More informationBUSINESS VALUATIONS: FUNDAMENTALS, TECHNIQUES AND THEORY (FT&T) CHAPTER 1
Fundamentals, Techniques & Theory INTRODUCTION TO BUSINESS VALUATION BUSINESS VALUATIONS: FUNDAMENTALS, TECHNIQUES AND THEORY (FT&T) CHAPTER 1 REVIEW QUESTIONS 1995 2013 by National Association of Certified
More information2016 Association of Accredited Small Business Consultants. All rights reserved.
BUSINESS VALUATION 2016 Association of Accredited Small Business Consultants. All rights reserved. This information is furnished with the understanding that the publisher is not engaged in rendering legal,
More informationDETERMINING AGENCY VALUE PART 2
DETERMINING AGENCY VALUE PART 2 NORMALIZING THE INCOME STATEMENT By: Chuck Coyne, ASA This month we continue our discussion of how to determine an agency s value. Last month we briefly discussed some of
More information* Are the Public and Private Capital Markets Worlds Apart? M. Mark Walker, PhD, CFA, CBA
WINTER 2007/2008 THE INSTITUTE OF BUSINESS APPRAISERS, INC. Business Appraisal Practice In this Issue Editor's Column - Does a Historical Average, Weighted or Otherwise, Constitute an Income Forecast?
More informationComment Letter 16 from the National Association of Romanian Valuers, ANEVAR
Comment Letter 16 from the National Association of Romanian Valuers, ANEVAR Comments on the Exposure Draft Proposed New International Valuation Standards, published June 2010 Email: CommentLetters@ivsc.org
More informationSpecial Purpose Properties. Special Valuation Considerations
Special Purpose Properties Special Valuation Considerations 2017 Case Study in Ottawa: New Automobile Dealership Many brand-specific specialties Cost: $4,000,000 (including land and a developer fee) Sales
More informationContract-Related Intangible
Income Tax Insights Valuation of Contract-Related Intangible Assets Robert F. Reilly, CPA The valuation of contract-related intangible assets is often an issue in matters related to income tax, gift tax,
More informationPURCHASE PRICE ALLOCATION IN REAL ESTATE TRANSACTIONS: Does A + B + C Always Equal Value?
PURCHASE PRICE ALLOCATION IN REAL ESTATE TRANSACTIONS: Does A + B + C Always Equal Value? Morris A. Ellison, Esq. 1 Womble Carlyle Sandridge & Rice, LLP Nancy L. Haggerty, Esq. Michael Best & Friedrich,
More informationHow to Read a Real Estate Appraisal Report
How to Read a Real Estate Appraisal Report Much of the private, corporate and public wealth of the world consists of real estate. The magnitude of this fundamental resource creates a need for informed
More information2018 Tennessee Judicial Conference March 7, 2018 Montgomery Bell State Park
2018 Tennessee Judicial Conference March 7, 2018 Montgomery Bell State Park The Essentials of Business Valuation For Tennessee Judges (Why are the Experts so Far Apart?) Presented by: Robert Vance, CPA,
More informationBusiness Valuations in the Planned Giving Context
Business Valuations in the Planned Giving Context 38 th Annual Minnesota Planned Giving Conference November 4, 2014 Presented by: Richard C. Berning, CPA/ABV/CFF, CBA, CVA, ABAR, CMA Copyright 2014: Berning
More informationAICPA Valuation Services VS Section Statements on Standards for Valuation Services VS Section 100 Valuation of a Business, Business Ownership
AICPA Valuation Services VS Section Statements on Standards for Valuation Services VS Section 100 Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset Calculation Engagements
More informationParagraph s 8, 9, and 10 from NACVA. Letter of October 27, 2016
Paragraph s 8, 9, and 10 from NACVA Letter of October 27, 2016 Re: Comments Regarding Proposed Treasury Regulation (REG. 163113-02) (to be used also as an Outline of Topics to be Discussed at the Public
More informationTennessee Bar Association Webcast August 23, 2018
Tennessee Bar Association Webcast August 23, 2018 The Essentials of Business Valuation For Tennessee Attorneys (Why are the Experts so Far Apart?) As Presented to the 2018 Tennessee Judicial Conference,
More informationBUSINESS VALUATIONS UNDER CALIFORNIA CORPORATIONS CODE SECTION 2000
BUSINESS VALUATIONS UNDER CALIFORNIA CORPORATIONS CODE SECTION 2000 Prepared by: Business Valuation Section of the Litigation Sections of the March 2000 The information contained herein is protected under
More informationBusiness Valuation More Art Than Science
Business Valuation More Art Than Science One of the more difficult aspects of business planning is business valuation. It is also one of the more important aspects. While owners of closely held businesses
More informationLeaseCalcs: How to ruin EBITDA results: Renew your lease.
LeaseCalcs: How to ruin EBITDA results: Renew your lease. Marc A. Maiona June 20, 2015 Your client just renewed their lease and wrecked EBITDA in the process If You Care About EBITDA, You Shouldn t Renew.
More informationPersonal vs. Enterprise Goodwill: Where Are We and How Do I Deal With It? By: Gary R. Trugman CPA/ABV, MCBA, ASA, MVS
Personal vs. Enterprise Goodwill: Where Are We and How Do I Deal With It? By: Gary R. Trugman CPA/ABV, MCBA, ASA, MVS Speaker Biography Gary R. Trugman is the President of Trugman Valuation Associates,
More informationAPES 225 Valuation Services
APES 225 Valuation Services [Supersedes APES 225 Valuation Services issued in July 2008 and revised in May 2012] Prepared and issued by Accounting Professional & Ethical Standards Board Limited REVISED:
More informationMini Summit VIII Fair Market Value Update: FMV of Services
Mini Summit VIII Fair Market Value Update: FMV of Services Mark DeWyngaert, PhD, MBA John Moose, MBA, CPA, ABV Thirteenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum
More informationIssues to Consider in Rights of First Refusal
Issues to Consider in Rights of First Refusal Written By Clint D. Routson (cdr@wardandsmith.com) October 16, 2017 People often talk about giving or getting a Right of First Refusal ("ROFR") in real estate
More informationGuide Note 16 Arbitration 1
Guide Note 16 Arbitration 1 Introduction Real estate valuation professionals ( Valuer or Valuers ) are often retained to provide services in arbitration matters 2 either as arbitrators or expert witnesses
More informationGuide to Appraisal Reports
Guide to Appraisal Reports What is an appraisal? An appraisal is an independent valuation of real property prepared by a qualified Appraiser and fully documented in a report. Based on a series of appraisal
More informationMARKET VALUE BASIS OF VALUATION
4.2 INTERNATIONAL VALUATION STANDARDS 1 MARKET VALUE BASIS OF VALUATION This Standard should be read in the context of the background material and implementation guidance contained in General Valuation
More informationAMERICAN SOCIETY OF APPRAISERS. Business Valuation. Guide to Professional Accreditation
AMERICAN SOCIETY OF APPRAISERS Business Valuation Guide to Professional Accreditation TABLE OF CONTENTS ASA s Advancement Process... 2 Business Valuation (BV) Guidelines... 3 POV Curriculum Challenge Exam...
More informationValuation Issues and Divorce
Lori Wilhelmy, ASA 513.813.4134 LWilhelmy@ComStockAdvisors.com Valuation Issues and Divorce The valuation of a closely held business for divorce purposes is based on valuation theory, state statute and
More informationKEY ISSUES IN BUSINESS VALUATIONS FOR DOMESTIC MATTERS A VALUATION EXPERT S PERSPECTIVE. February 14 21, 2015 MSBA Punta Cana, Dominican Republic
KEY ISSUES IN BUSINESS VALUATIONS FOR DOMESTIC MATTERS A VALUATION EXPERT S PERSPECTIVE February 14 21, 2015 MSBA Punta Cana, Dominican Republic Presented by: R. Christopher Rosenthal, CPA /ABV, ASA, CFF,
More informationJoint Ownership And Its Challenges: Using Entities to Limit Liability
Joint Ownership And Its Challenges: Using Entities to Limit Liability AUSPL Conference 2016 Atlanta, Georgia May 5 & 6, 2016 Joint Ownership and Its Challenges; Using Entities to Limit Liability By: Mark
More informationAVA. Accredited Valuation Analyst - AVA Exam.
NACVA AVA Accredited Valuation Analyst - AVA Exam TYPE: DEMO http://www.examskey.com/ava.html Examskey NACVA AVA exam demo product is here for you to test the quality of the product. This NACVA AVA demo
More informationTHE ART OF BUSINESS VALUATION
BUSINESS VALUATIONS GROWING THE ART OF BUSINESS VALUATION Douglas A. Michel, CPA/ABV, CVA & Alex E. Kummer, CPA, CVA, Clark Schaefer Hackett THE VALUE OF YOUR BUSINESS Steve Lumley, LGI CFO BUY SELL AGREEMENTS
More information10 Common Mistakes in Valuing ASCs and How to Avoid Them
10 Common Mistakes in Valuing ASCs and How to Avoid Them Presented by: Hunter Outcalt, MTx, CPA Director, HealthCare Appraisers HealthCare Appraisers, Inc. HealthCare Appraisers is the nation s leading
More informationConservation Easement Appraisals. Applicability. Part I: Appraisal Concepts and Methods of Valuation
Conservation Easement Appraisals 2011 Wyoming Conservation Easement Conference June 2, 2011 Laramie, Wyoming Hunsperger & Weston, Ltd. Mark Weston 5889 Greenwood Plaza Boulevard Suite 404 Greenwood Village,
More informationPROFESSIONAL STANDARDS
Fundamentals, Techniques & Theory CHAPTER EIGHT These Professional Standards are Effective for Engagements accepted on or After June 1, 2011 1995 2012 by National Association of Certified Valuators and
More informationAMERICAN SOCIETY OF APPRAISERS. Procedural Guidelines. PG-2 Valuation of Partial Ownership Interests
AMERICAN SOCIETY OF APPRAISERS Procedural Guidelines PG-2 Valuation of Partial Ownership Interests I. Preamble A. Business valuation professionals are frequently engaged as independent financial appraisers
More informationRefurbishment of. Apartments how do you calculate? Refurbishment costs and life expectancy. Refurbishment Costs. Life expectancy
Refurbishment of Apartments how do you calculate? Alexander Krüger, 2009-04-14 To calculate a refurbishment of an apartment sounds pretty simple you have costs and the advantage of increase in rental income.
More informationVALUATION OF PROPERTY. property. REALTORS need to keep in mind first, that the Occupational Code limits what
VALUATION OF PROPERTY I. INTRODUCTION REALTORS are often asked for their opinion on the value of a particular piece of property. REALTORS need to keep in mind first, that the Occupational Code limits what
More informationThe capitalization rate is essential to any analysis through the income
FEATURES An Argument for Establishing a Standard Method of Capitalization Derivation by Eric T. Reenstierna, MAI The capitalization rate is essential to any analysis through the income capitalization approach.
More informationUsing the Work of an Auditor s Specialist: Auditing Interpretations of Section 620
Using the Work of an Auditor s Specialist 767 AU-C Section 9620 Using the Work of an Auditor s Specialist: Auditing Interpretations of Section 620 Interpretation No. 1, "The Use of Legal Interpretations
More informationWYOMING DEPARTMENT OF REVENUE CHAPTER 7 PROPERTY TAX VALUATION METHODOLOGY AND ASSESSMENT (DEPARTMENT ASSESSMENTS)
CHAPTER 7 PROPERTY TAX VALUATION METHODOLOGY AND ASSESSMENT (DEPARTMENT ASSESSMENTS) Section 1. Authority. These Rules are promulgated under the authority of W.S. 39-11-102(b). Section 2. Purpose of Rules.
More informationAcquisition of investment properties asset purchase or business combination?
Acquisition of investment properties asset purchase or business combination? Our IFRS Viewpoint series provides insights from our global IFRS team on applying IFRSs in challenging situations. Each edition
More informationProposed FASB Staff Position No. 142-d, Amortization and Impairment of Acquired Renewable Intangible Assets (FSP 142-d)
Financial Reporting Advisors, LLC 100 North LaSalle Street, Suite 2215 Chicago, Illinois 60602 312.345.9101 www.finra.com Mr. Lawrence W. Smith Director - Technical Application and Implementation Activities
More informationBusiness Valuation Methods. Submitted by Paul Marquez
Business Valuation Methods Submitted by Paul Marquez 59 I. BUSINESS VALUATION METHODS A. Rules of Thumb B. Asset-Based Methods of Valuation C. Income Statement Methods of Valuation D. Market-Based Methods
More informationDifficult Valuation Issues
Difficult Valuation Issues Panelists Douglas K. Fejer, Dallas Michael P. Geary, Addison Haran D. Levy, Houston Moderator Cheryl L. Wilson, San Antonio State Bar Of Texas th 38 Annual Advanced Family Law
More informationExposure Draft of Proposed Changes to ADVISORY OPINION 21 (AO-21), USPAP Compliance
TO: FROM: RE: All Interested Parties Barry J. Shea, Chair Appraisal Standards Board Exposure Draft of Proposed Changes to ADVISORY OPINION 21 (AO-21), USPAP Compliance DATE: February 22, 2013 The goal
More informationOn 1 February 2013 the IVSC announced the release of an Exposure Draft dealing with amendments to IVS 2011.
29 April 2013 IVSC Standards Board International Valuation Standards Council 41 Moorgate LONDON EC2R 6PP Dear Sirs, Exposure Draft Amendments to the International Valuation Standards On 1 February 2013
More informationWHAT EVERY ATTORNEY NEEDS TO KNOW ABOUT BUSINESS VALUATION AND WHY
NEEDS TO KNOW ABOUT BUSINESS VALUATION ALAN L. TOLMAS, CPA/ABV/CFF, ASA PRINCIPAL/FOUNDER 972.931.1800 atolmas@texff.com SOLO & SMALL FIRM SECTION FEBRUARY 1, 2012 LUNCHEON MEETING NEEDS TO KNOW ABOUT
More informationSecond Exposure Draft of proposed changes for the edition of the Uniform Standards of Professional Appraisal Practice
TO: FROM: RE: All Interested Parties Sandra Guilfoil, Chair Appraisal Standards Board Second Exposure Draft of proposed changes for the 2012-13 edition of the Uniform Standards of Professional Appraisal
More informationVALUATION CONSIDERATIONS AND METHODS FOR A PATENT VALUATION ANALYSIS
Insights Autumn 2009 54 Intellectual Property Valuation Insights VALUATION CONSIDERATIONS AND METHODS FOR A PATENT VALUATION ANALYSIS C. Ryan Stewart In recent years, the value of patents and other intellectual
More informationAppraisal and Market Analysis of Indoor Waterpark Resorts
Appraisal and Market Analysis of Indoor Waterpark Resorts By David J. Sangree, MAI, CPA, ISHC An appraisal of an indoor waterpark resort is similar to other appraisals in that it is a professional appraiser
More informationValuing Specialty and Emergency Practices. Lorraine Monheiser List, CPA, CVA Summit Veterinary Advisors, Littleton, CO, USA
Valuing Specialty and Emergency Practices INTERNATIONAL VETERINARY EMERGENCY AND CRITICAL CARE SYMPOSIUM 2010 Lorraine Monheiser List, CPA, CVA Summit Veterinary Advisors, Littleton, CO, USA 2010 Used
More informationIntellectual Property Forensic Analysis Valuation Considerations
Forensic Analysis Insights Best Practices Intellectual Property Forensic Analysis Valuation Considerations Robert F. Reilly, CPA Valuation analysts are often asked to perform intellectual property (patents,
More informationTo Receive CPE Credit
Successfully Defending Valuations During Estate & Gift Tax Exams Carol Lewis, CPA, ABV Partner Forensics & Valuation Services clewis@bkd.com October 8, 2014 experience expertise // Elevate your understanding
More informationData Verification. Professional Excellence Bulletin [PP-14-E] February 1995
Professional Excellence Bulletin [PP-14-E] February 1995 Although obviously a cornerstone of appraisal practice, data verification has not been considered a major problem to real estate appraisers in the
More informationAcross-the-Fence Value and Hostage Occupancy Agreements
Across-the-Fence Value and Hostage Occupancy Agreements EUCI Conference: Electric Transmission Projects San Diego, California September 19, 2016 John T. Schmick Shenehon Company 2 What is the goal of valuation
More informationTHIS IS THE TITLE OF THE DOCUMENT. What You Should Know About CRE Leases
THIS IS THE TITLE OF THE DOCUMENT What You Should Know About CRE Leases Copyright PropertyMetrics.com All Rights Reserved Feel free to email, tweet, blog, and pass this ebook around the web... but please
More informationTITLES BASED ON FIDUCIARIES' DEEDS CARE AND CARELESSNESS IN EXAMINING THEM. Some title examiners are too prone to minimize the possible effect of
TITLES BASED ON FIDUCIARIES' DEEDS CARE AND CARELESSNESS IN EXAMINING THEM. Some title examiners are too prone to minimize the possible effect of various defects which result from the careless preparation
More informationAnatomy Of An Appraisal
Anatomy Of An Appraisal Leslie A. Fields The most important thing to know about an appraisal report is how to review and critique it. Leslie A. Fields a partner with the Law Firm of Faegre & Benson LLP,
More informationREAL ESTATE INVESTING GUIDE. Combine IRA tax advantages with real estate investment opportunities.
REAL ESTATE INVESTING GUIDE Combine IRA tax advantages with real estate investment opportunities. INTRODUCTION The IRS allows an IRA, Solo 401(k), or HSA to acquire real estate as an asset without penalty
More informationFirst Exposure Draft of proposed changes for the edition of the Uniform Standards of Professional Appraisal Practice
TO: FROM: RE: All Interested Parties J. Carl Schultz, Jr., Chair Appraisal Standards Board First Exposure Draft of proposed changes for the 2014-15 edition of the Uniform Standards of Professional Appraisal
More informationWhat/Who Determines that an Appraiser is Qualified in our Program?
What/Who Determines that an Appraiser is Qualified in our Program? Mike Jones, SR/WA, Maryland Certified General Appraiser Realty Specialist, FHWA Office of Real Estate Services Is it becoming tougher
More informationMisconceptions about Across-the-Fence Methodology
Misconceptions about Across-the-Fence Methodology BY JOHN SCHMICK Across-the-fence methodology (ATF) is an appraisal tool frequently used in valuation assignments where the subject is part of railroad
More informationINTANGIBLE VALUE FACT OR FICTION
1 Define Intangible OUTLINE Outline Appraisal Concepts, Definitions and Issues Examine Legal Framework Examine Case Study Provoke Debate Declare Winning Argument (But the points don t matter) 2 One of
More informationIntangible assets have continually grown in their importance as a driver of value in businesses, in particular over the past thirty years.
Intangible assets have continually grown in their importance as a driver of value in businesses, in particular over the past thirty years. In the 1980s large, publicly-traded company values were generally
More informationProving Depreciation
Institute for Professionals in Taxation 40 th Annual Property Tax Symposium Tucson, Arizona Proving Depreciation Presentation Concepts and Content: Kathy G. Spletter, ASA Stancil & Co. Irving, Texas kathy.spletter@stancilco.com
More informationSUBJECT: Unacceptable Assignment Conditions in Real Property Appraisal Assignments
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 ADVISORY OPINION 19 (AO-19) This communication by the Appraisal Standards Board (ASB) does not establish new standards
More informationThe Financial Accounting Standards Board
V A L U A T I O N How the New Leases Standard May Impact Business Valuations By Judith H. O Dell, CPA, CVA The Financial Accounting Standards Board issued the 485 page Leases Standard (Topic 842) in February,
More informationV aluation. Concepts. Adding up the little stuff <> Normalization adjustments under the income approach. inside:
V aluation Concepts inside: Adding up the little stuff Normalization adjustments under the income approach Lack of control discounts don t always apply to minority interests Are S corporations worth
More informationChapter 35. The Appraiser's Sales Comparison Approach INTRODUCTION
Chapter 35 The Appraiser's Sales Comparison Approach INTRODUCTION The most commonly used appraisal technique is the sales comparison approach. The fundamental concept underlying this approach is that market
More information10 Questions to Answer During Due Diligence
10 Questions to Answer During Due Diligence About the Author Jim Chiswell is an industry veteran and the owner of Chiswell & Associates LLC. Since 1990, his firm has provided feasibility studies, acquisition
More informationBUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 1
BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 1 1. The three characteristics necessary to gain professional recognition are: Integrity, Competence, and Provide Quality Work. Students
More informationAs seen in the September issue of Michigan Lawyers Weekly THE DIMINUTION OF THE GOOD FAITH OFFER PROTECTIONS IN EMINENT DOMAIN PROCEEDINGS
As seen in the September issue of Michigan Lawyers Weekly THE DIMINUTION OF THE GOOD FAITH OFFER PROTECTIONS IN EMINENT DOMAIN PROCEEDINGS By Alan T. Ackerman This article explores whether the minimum
More informationImlTRUST LANDS. August 15, 2014
1707 North 9th Street PO Box 5523 Bismarck, ND 58506-5523 Phone: (701) 328-2800 Fax: (701 ) 328-3650 www.fand.nd.gov Letter of Comment No. 38 D E PARTMENT OF ImlTRUST LANDS INVE STING FOA EDUCATION Lance
More informationSaskatchewan Municipal Board Assessment Appeals Committee
Saskatchewan Municipal Board Assessment Appeals Committee Appeal: 2009-0039 RESPONDENT: Town of Hudson Bay In the matter of an appeal to the Assessment Appeals Committee, Saskatchewan Municipal Board,
More informationASSESSORS ANSWER FREQUENTLY ASKED QUESTIONS ABOUT REAL PROPERTY Assessors Office, 37 Main Street
A. THE ASSESSMENT PROCESS: ASSESSORS ANSWER FREQUENTLY ASKED QUESTIONS ABOUT REAL PROPERTY Assessors Office, 37 Main Street What is mass appraisal? Assessors must value all real and personal property in
More informationASA MTS CANDIDATE REPORT REVIEW CHECKLIST INSTRUCTIONS (Effective as of January 01, 2018) Basic Report Requirements and General Report Quality
ASA MTS CANDIDATE REPORT REVIEW CHECKLIST INSTRUCTIONS (Effective as of January 01, 2018) Basic Report Requirements and General Report Quality This checklist was designed to be a useful resource tool by
More informationFILE: EFFECTIVE DATE: May 15, 2013 AMENDMENT: 1
APPROVED AMENDMENTS: Effective Date Briefing Note /Approval Summary of Changes: June 1, 2011 BN 175892 Policy and Procedure update to reflect reorganization of resource ministries April 2011 May 15, 2013
More informationBuilding Control Regulations APPLICABILITY OF PROVISIONS OF S.I.9 OF 2014 TO HOUSE EXTENSIONS 16 January 2015 Eoin O Cofaigh
1 Building Control Regulations APPLICABILITY OF PROVISIONS OF S.I.9 OF 2014 TO HOUSE EXTENSIONS 16 January 2015 Eoin O Cofaigh The author is an architect in private practice and is not legally qualified.
More informationASA s 7 th Annual Equipment Valuation Conference. Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation
ASA s 7 th Annual Equipment Valuation Conference Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation Background Information Rick Wilichowski Managing Director, Machinery & Equipment
More informationSOCIAL INVESTMENT TAX RELIEF
SOCIAL INVESTMENT TAX RELIEF A GUIDE TO SITR AND PROPERTY DEVELOPMENT May 2017 For more information and resources on SITR, please visit www.bigsocietycapital.com/sitr. This note has been prepared to help
More informationSection 9 after Pattle
Section 9 after Pattle By Reuben Taylor 1. This paper examines the compensation code s approach to compensating a freehold owner for rental losses, with particular regard to section 9 and the decision
More informationESOP Feasibility and Valuation Basics
ESOP Feasibility and Valuation Basics Ohio Employee Ownership Center Akron/Fairlawn Hilton Fairlawn, Ohio April 21, 2006 Richard A. Schlueter rschlueter@comstockvaluation.com C VA 1 Levee Way, Suite 3109
More informationYour Guide to Real Estate in an IRA
Tim Conarro Summit Commercial Brokers PO Box 9 Niwot CO 80544 303-746-1490 www.longmont-commercial-realestate.com Your Guide to Real Estate in an IRA Information is provided by New Direction IRA, Inc.
More informationDon Barbo, CPA/ABV Deloitte Financial Advisory Services LLP, Dallas, TX,
Fair Market Value in Health Care Transactions: Advanced (and Thorny) Issues, Part III: Commercial Reasonableness in Contrast with Fair Market Value: What s the Difference and Who Makes the Call? Thursday,
More informationWarning! Warning! Warning! By Bob Keith, Administrator
Warning! Warning! Warning! By Bob Keith, Administrator This article is rather long, but I encourage you to read it. Five of the subheadings are active and on-going issues causing compliance problems for
More informationWE MAKE YOUR HEALTHCARE REAL ESTATE WORK FOR YOU COMMON TRANSACTIONAL COMPLIANCE PITFALLS INVOLVING HEALTHCARE REAL ESTATE
WE MAKE YOUR HEALTHCARE REAL ESTATE WORK FOR YOU COMMON TRANSACTIONAL COMPLIANCE PITFALLS INVOLVING HEALTHCARE REAL ESTATE Common Transactional Compliance Pitfalls Involving Healthcare Real Estate Table
More informationMPEEM The New and Improved Residual Technique of Reserve Valuation
MPEEM The New and Improved Residual Technique of Reserve Valuation Prepared by Alan K. Stagg, PG, CMA Stagg Resource Consultants, Inc. Cross Lanes, West Virginia ABSTRACT The residual technique of reserve
More informationEasy Legals Avoiding the costly mistakes most people make when buying a property including buyer s checklist
Easy Legals Avoiding the costly mistakes most people make when buying a property including buyer s checklist Our Experience is Your Advantage 1. Why is this guide important? Thank you for ordering this
More informationNOT DESIGNATED FOR PUBLICATION. No. 118,206 IN THE COURT OF APPEALS OF THE STATE OF KANSAS. JAYHAWK PIPELINE, L.L.C., Appellee, MEMORANDUM OPINION
NOT DESIGNATED FOR PUBLICATION No. 118,206 IN THE COURT OF APPEALS OF THE STATE OF KANSAS JAYHAWK PIPELINE, L.L.C., Appellee, v. MWM OIL CO., INC.; BENJAMIN M. GILES; MIKE A. GILES, DARREN KIRKPATRICK;
More informationCalifornia Real Estate License Exam Prep: Unlocking the DRE Salesperson and Broker Exam 4th Edition
California Real Estate License Exam Prep: Unlocking the DRE Salesperson and Broker Exam 4th Edition ANSWER SHEET INSTRUCTIONS: The exam consists of multiple choice questions. Multiple choice questions
More informationBusiness Combinations
International Financial Reporting Standard 3 Business Combinations This version was issued in January 2008. Its effective date is 1 July 2009. It includes amendments resulting from IFRSs issued up to 31
More informationRoute des Morillons Grand-Saconnex Geneva Switzerland
lea. INTERNATIONAL CO-OPERATIVE ALLIANCE Route des Morillons 15 1218 Grand-Saconnex Geneva Switzerland Tel: (4122) 929 88 88 Fax:(4122)7984122 E-mail: ica@ica.coop ica@ica.coqp Website: www.ica.coop Technical
More informationBUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 10
BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 10 1. The client should give you a copy of their income and expense statements for the last 3 years showing their rental income by
More informationContent Contributed by the Appraisal Database and Mentoring Services (ADAM) Around the Valuation World in 90 Minutes Monthly Webzine
Content Contributed by the Appraisal Database and Mentoring Services (ADAM) Around the Valuation World in 90 Minutes Monthly Webzine DISCLAIMER All rights reserved. No part of this work covered by the
More informationTHE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330
THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330 REVIEW NOTES by CHUCK DUNN CHAPTER 12 Copyright 2010 by the Real Estate Division and Chuck Dunn. All rights reserved ARE 3 RD EDITION REVIEW
More informationCornerstone 2 Basic Valuation of Machinery and Equipment
INSTITUTE FOR PROFESSIONALS IN TAXATION PERSONAL PROPERTY TAX SCHOOL Cornerstone 2 Basic Valuation of Machinery and Equipment Learning Objectives At the end of this section, the learner will be able to:
More informationabsorption rate ad valorem appraisal broker price opinion capital gain
absorption rate The estimated time required to sell or lease property within a designated area at its fair market value. ad valorem Real estate taxes imposed on property based on its assessed value. appraisal
More informationProcedures Used to Calculate Property Taxes for Agricultural Land in Mississippi
No. 1350 Information Sheet June 2018 Procedures Used to Calculate Property Taxes for Agricultural Land in Mississippi Stan R. Spurlock, Ian A. Munn, and James E. Henderson INTRODUCTION Agricultural land
More informationReal Estate Syndication Income 19,451 NOTE
Real Estate Syndication Income 19,451 Section 10,500 Statement of Position 92-1 Accounting for Real Estate Syndication Income February 6, 1992 NOTE Statements of Position of the Accounting Standards Division
More informationGeorgia Tech Financial Analysis Lab 800 West Peachtree Street NW Atlanta, GA
800 West Peachtree Street NW Atlanta, GA 30308-0520 404-894 - 4395 http://www.scheller.gatech.edu/finlab Dr. Charles W. Mulford, Director Invesco Chair and Professor of Accounting charles.mulford@scheller.gatech.edu
More information