New ASA standard; first in 12 years

Last week, the American Society of Appraisers (ASA) announced in their Business Valuation E-Letter that a new standard, BVS-IX Intangible Asset Valuation, was recently approved.  BVS-IX provides general guidance for the valuation of intangible assets—its Appendix A provides further guidance on the valuation of the four classes of intellectual property: patents, trademarks, copyrights, and trade secrets.  Chris Mercer, ASA, CFA (Mercer Capital, Memphis, TN), who serves as chair of the BV Standards Subcommittee, provided the BVWire with some insight:

BVS-IX Intangible Asset Valuation is a new standard—the first new standard since January 1996.  It was developed by a highly qualified subcommittee including Claire Donias, Richard Wise, Gordon Smith, Russell Parr, Robert Schweihs, Jeffrey Jones, and Timothy Cromley, Chair.  It was released for exposure and discussion prior to the new Standards Subcommittee’s appointment.  We picked up the ball and addressed comments, as appropriate.  With further guidance from the Business Valuation Committee, we were able to complete BVS-IX and it was approved at its June meeting in Minneapolis.

One of the biggest changes in the form of the standards is in BVS-I General Requirements for Developing a Business Valuation, at §II.B., subparagraphs 1-14.  In this section, all of the various defining elements of a valuation assignment found throughout the ASA Business Valuation Standards and the Uniform Standards of Professional Appraisal Practice were consolidated in one place.  My suggestion is that appropriate professionals at every firm examine their report templates in light of this list to ensure that assignments are appropriately defined, hopefully in one place in their reports.  

View the ASA Business Valuation Standards here and, per Chris’ suggestion, make sure to read §II.B on page 5.

Total compensation for entry-level BV financial analysts approaches $50K  

While the competition for entry-level financial analyst staff is less intense than it was a few years ago, salaries have trended up slightly—averaging around $47,000 according to the 2009 BV Firm Economics and Best Practices Survey, which will be released in mid-September.  With the inclusion of bonuses, total compensation now averages $48,740.  (The range of total compensation among the over 400 firms who provided data ran from a low of $33,000 to a high of $70,000.)   The Survey defines “entry level analyst” as someone with 0-2 years of experience, an undergraduate degree, no business valuation certification, and little client contact.  The Survey includes compensation data for financial analysts at all levels, researchers, and billable staff. 

Business combinations topic in verification phase

The Financial Accounting Standards Board (FASB) has released the Business Combinations Topic to the FASB Accounting Standards Codification™ for the verification phase.

"The addition of the Business Combinations Topic is yet another step in the evolution of the Codification, which, when approved in April 2009, will become the single source of authoritative U.S. GAAP," states Tom Hoey, project director for the FASB Codification project. "During the current verification period, constituents are encouraged to provide their input on whether the Business Combinations Topic and all other Codification content accurately reflect U.S. GAAP."

The Business Combinations Topic integrates various standards, including FASB Statement No. 141(R) Business Combinations.  Register at http://asc.fasb.org to access and review the online Codification, free of charge. Constituents have the chance to become acquainted with the Codification’s new structure and provide the FASB with feedback regarding any content issues before it becomes authoritative on January 15, 2009 (read more here).

New BVWire comments webpage

To accommodate reader responses and feedback, BVWire has established a new comment page located here.  Recent comments posted to this page include those on the SEC Draft Report on Financial Reporting and the Baldwin v. Bader case.  If you’d like to add your feedback to these, or other, ongoing discussions, send an email to bvwire@bvresources.com. Let us know if you’d like your name published or kept anonymous.

Conference season heats up

There are some great business valuation events coming up in the fall. First is the CICBV National Conference, September 4-5 in Quebec City, with two keynote addresses, one on the International Financial Reporting Standards (IFRS) with Ian Hague (CICA), and the other titled “Evolution of the BV Profession” with Ian Campbell (Campbell Valuation Partners). 

In addition, the ASA, in conjunction with BVR, is offering Divorce: A Hands-On Workshop for BV Practitioners in Atlanta, September 16-17.  Organized by Jay Fishman and Bill Morrison, the event will be attended by matrimonial lawyers and BV experts.   The following day, Judge David Laro and Mel Abraham are co-chairing the University of San Diego School of Law Business Valuation Conference for tax attorneys and appraisers.   And, of course, the largest business valuation event of them all, the biennial ASA/AICPA National Business Valuation Conference, is November 8-10 in Las Vegas.   It’s a great season for networking and education (and CPE or CLE credits) in the BV profession.     

Best financial benchmarking data now available in single reports!

Business appraisers rely on many sources for industry benchmarks, and Integra’s 5-Year Industry Data Reports are generally considered to be among the most accurate.   To make them more accessible to appraisers, BVR is excited to introduce Integra 5-Year Industry Data Reports on a single-search basis! For the low price of $140 per report, get access to five years of detailed financial data on the industry of your choice—even specify a revenue range to get the right size companies you need. Each comprehensive report includes five years of income statements, balance sheets, cash flow analysis, and over 60 financial ratios.  The data is available in one of multiple formats, including PDF, Excel®, and HTML. View a sample report here.  

SEC IFRS Roadmap coming August 27

The SEC posted a Sunshine Act Notice on August 22, 2008, announcing it will consider proposing an International Financial Reporting Standards (IFRS) Roadmap at an open commission meeting on August 27. Other matters to be addressed at the open commission meeting include issues relating to foreign private issuers and cross-border business combinations.

$35M settlement reached in Legionnaires’ Cruise case

The highly publicized Celebrity Cruise, Inc. case over lost profits caused by a 1984 Legionnaires’ disease outbreak aboard the Celebrity ship “Horizon” has settled.  The maker of the swimming pool water filters (Essef Corporation, now called Pentair Water Treatment Co.)—which allegedly triggered the disease—agreed to pay the cruise company $35 million this month.  Subscribers to the Deluxe Business Valuation Update™ can read the January 2007 District Court abstract of the case and the January 2008 District Court abstract at BVLibrary.com.

PCAOB ruled constitutional

As noted in issue #52-1 of the BVWire, the Free Enterprise Fund and the Competitive Enterprise Institute have been involved in ongoing litigation with the Public Company Accounting Oversight Board (PCAOB).  The litigation is based on the grounds that the PCAOB is unconstitutional because it is unaccountable to government. On August 22nd, the PCAOB issued a press release (view here) stating that the Court of Appeals upheld the District Court’s decision in the PCAOB’s favor.  The Court held that the manner in which PCAOB Board members are appointed and overseen under the Sarbanes-Oxley Act is constitutional.