BVWire Issue #167-5 | August 31, 2016


New simpler way for CFAs to earn ASA credential

The American Society of Appraisers (ASA) now offers a streamlined way for CFAs to earn its business valuation credential. CFAs with five years of full-time business valuation experience now qualify for “education equivalency” for the ASA credential. That means that CFAs who qualify no longer have to take ASA’s BV201 through 204 classes or exams.

Faster track: This policy change is in recognition of the rigorous curriculum an individual must go through to obtain the CFA credential. CFAs would still have to take a Uniform Standards of Professional Appraisal Practice (USPAP) course (available online), meet ASA’s ethics requirements, and submit a report for peer review. Of course, ongoing educational requirements are required. Accreditation information is available if you click here.

Extra: BVR and BVWire will be at the ASA’s Advanced Business Valuation Conference September 11-14 in Boca Raton, Fla. There’s a terrific lineup of speakers and sessions, so we urge you to attend. Stop by the BVR booth and say hello!

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Multiple grounds exist to challenge IRC Section 2704 regs, lawyers say

“An overarching attack on discounts in family limited partnerships” is how attorney John Porter (Baker Botts) characterized the Treasury Department’s proposed regulations under Section 2704 in a recent Bloomberg BNA webinar. Will there be a challenge to the regs? “You betcha,” he says.

Unreal world: Porter and his co-presenter, attorney Stacy Eastland (Goldman Sachs), agree that in the real world owning a minority interest in a family limited partnership or an LLC more often than not is onerous and justifies the use of minority and lack of marketability discounts. Eastman goes as far as describing it as a “phantom asset” because the interest holder often can’t dispose of it. Discount abuses on the magnitude the IRS claims to need to rectify by way of the regulations don’t occur in real world, the speakers say.

Aspects of the regulations themselves are imaginary. Take, for example, the construct of a “put right,” that is, the ability of each member of the entity to force the company to buy back his or her interest for cash equal to a minimum value (a pro rata portion of the fair market value of the entire entity) within six months of exercising the right. No such right exists in the real world, both speakers emphasize.

Porter says the regulations are an overreach by the IRS because Congress did not intend the Chapter 14 valuation rules to target minority discounts and DLOMs; rather it sought to address artificial restrictions. As Porter sees it, the IRS is trying to apply a family attribution test.

Grounds for the challenge: Porter says that there are at least two grounds for challenging the proposed regs: (1) The regulations don’t align with the legislative grant of regulatory authority; and (2) they are inconsistent with applicable statutes and legislative history.

Right now there is uncertainty as to what might happen if the regulations became law. Take, for example, the new contemplated three-year rule under 2704(a), which would nullify discounts taken for certain transfers that occurred within three years of the transferor’s death. Would it apply to transfers that occurred prior to the regulations being finalized? “Unclear,” Porter says.

But both speakers also stressed that, even if the regulations became law, “the sky wouldn’t fall.” Good lawyers will come up with structural solutions to minimize the regulations’ negative effect.

Reminder: Valuators have an opportunity to learn more about these complex regulations in our September 29 webinar with Curtis Kimball (Willamette Management Associates): The IRS’ Proposed Section 2704 Regulations: The Impact on and the Future of Estate and Gift Valuation.

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Average ERP stands at 4.02% for 2016

Ongoing research analyzes the history of the equity risk premium from surveys of U.S. chief financial officers conducted every quarter from June 2000 to June 2016. The latest information is contained in a paper “The Equity Risk Premium in 2016,” by John R. Graham and Campbell R. Harvey (Duke University and Duke University-Fuqua School of Business).

Up a little: They find that the average risk premium in 2016, 4.02%, is slightly higher than the average observed over the past 16 years. “We also provide results on the risk premium disagreement among respondents as well as asymmetry or skewness of risk premium estimates,” say the authors. “We also link our risk premium results to survey-based measures of the weighted average cost of capital and investment hurdle rates. The hurdle rates are significantly higher than the cost of capital implied by the market risk premium estimates.”

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Whitney Houston estate vs. IRS over IP values

Whitney Houston's estate says the royalties, residuals, and the value of the late performer's image are worth much less than the IRS says, according to BNA’s Daily Tax Report. The IRS claims the estate underreported the value of intellectual property rights by $22.6 million, resulting in a tax deficiency of $7.92 million and $3.17 million in penalties. The case is Estate of Houston v. Commissioner, T.C. No. 12098-16.

Laundry list: Intellectual property the IRS claims to be undervalued include royalties from albums, digital performance rights, movie and TV residuals, publicity rights, name and likeness, and merchandising royalties. The estate says the valuations are accurate, and it used appraisers with “substantial expertise valuing such assets for the entertainment industry.” Greenberg Traurig LLP represents the estate.

The IRS is looking for even higher amounts in the case of Michael Jackson, in which the IRS valued Jackson’s estate at $1.32 billion, while the estate asserted that the value was only around $7 million. The big discrepancy is in the value of his image and likeness: The IRS valued those rights at $434 million, but the estate says they’re only worth $2,105. The Jackson case is scheduled for trial in February 2017.

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Fifth Annual Business Valuation Challenge Now Underway!

“You don’t learn this at school.” “Easily the best experience of my college career.” “I learned more from this than all my classes this semester. This will stand out on my resume.” “The Challenge has opened up the world of valuations to me and piqued my interest in the profession.”—past BV Challenge contestants

The Business Valuation Challenge is entering its fifth year! Created by Professor Herbert Kierulff of Seattle Pacific University, this year’s Challenge will be proudly hosted by the J. Mack Robinson College of Business and Department of Finance at Georgia State University (GSU). It will take place November 11-12 at GSU.

The BV Challenge is an extraordinarily unique opportunity and learning experience for the students—and judges!—involved. It is a “real world” competition during which teams of students value an actual company and present their results. Business Valuation Resources will provide complimentary data, resources, and other materials for the Challenge, and GSU is working with the AICPA to coordinate industry mentors for each of the teams.

Deadline: There are 24 first-come-first-serve slots, and registrations must be received by September 15! University faculty members who wish to register a team of students please contact Dr. David Beard at Business valuation practitioners please pass the Challenge info and website along to your alma maters! The Challenge is also a great chance for BV firms to attract new talent—contact Dr. Beard at the above address for sponsorships and ways to get the word out on your firm.

Stay tuned for updates on the Fifth Annual Business Valuation Challenge!

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Global BV news:
Experts predict major growth in Indian BV market

Practitioners from three firms providing cross-border business valuation services from Indian offices believe that the Indian BV industry will grow significantly. Ray Moran (MG Valuation LLC) recently talked about this with Bharat Ramnani, director of valuation services for Aranca, Aroop Cherian, founder of Cherian Advisors, and Bharat Kanodia, founder of Veristrat. Moran is also a board member of the International Institute of Business Valuers.

Five-year outlook: They all believe that, especially domestically, the BV market is poised for significant growth, given the acceptance of IFRS and fair value reporting in India, as well as in the global markets. “Given the above mentioned amendments providing significant growth opportunities to the valuation industry, we expect a Compounded Average Growth Rate (CAGR) of about 20-25% over the coming five years,” says Ramnani. “There is immense opportunity for growth in this industry. We see professionals being exposed to a wider variety of opportunities—enhancing their professional and career growth chances,” adds Cherian.

As growth continues, there will be a push for standardization of valuation practices. “The introduction of the concept of Registered Valuer in the Companies Bill, 2011 has provided a framework to enable fair valuation in companies,” says Kanodia. “Thus, there will be a need for professional valuers to standardize the use of valuation practices in India, leading to transparency and better governance.”

You can read the full interview in an upcoming issue of Business Valuation Update.

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NACVA to stream the BV and Healthcare Valuation event September 19-21

In the comfort of your office or conference room, you can attend the Business Valuation and Healthcare Valuation Conference that will be in Washington, D.C., September 19-21. NACVA will stream the conference live for those who can’t attend in person. This is one of a series of regional specialty conferences presented by NACVA.

Top-notch speakers: There will be three tracks of sessions: two tracks of business valuation sessions and one track devoted to healthcare valuations. Speakers include Ashok Abbott (West Virginia University), Marc Bello (Edelstein & Co. LLP), Chris Best (Acclaro Valuation Advisors), Robert Cimasi (Health Capital Consultants), Robert Grossman (Grossman, Yanak & Ford LLP), James Harrington (Duff & Phelps), Courtney Sparks White (Clarus Partners LLC), and others. Topics include:

  • Goodwill (several sessions);
  • DLOM (several sessions);
  • Size premium;
  • Effect of IRS Job Aids;
  • Medical practice valuations for divorce;
  • Valuing ROFO and ROFR in healthcare; and
  • Much more, including overall trends in BV and healthcare.

Discount code: BVR has arranged special discount codes you can use when you register. The codes are: 16BVR (a $50 discount for a one-day specialty conference registration) and 16BVR2 (a $100 discount for a two-day specialty conference registration). Both codes expire Dec. 7, 2016. Please jot down the codes for when you go to register, which you can do if you click here.

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New learning paths highlight AICPA FVS Conference

Having attended last year’s AICPA Forensic & Valuation Services Conference, it’s hard to believe that they could improve on it—but they’ve done just that. They’ve added two new learning paths, Family Law and NextGen, as well as a new Fair Value Measurements track. In addition, there are enhanced tracks for Forensic Case Studies, Trending Now FVS, and Specialized Skills. This year’s event will be in Music City, USA—Nashville, Tenn.—on November 6-8 at the fabulous Gaylord Opryland Hotel.

Fresh routes: The Family Law path presents emerging issues in valuation, litigation support, expert testimony, and the unique intricacies of matrimonial disputes. The NextGen training is designed for individuals with fewer than five years of BV or forensic accounting experience. The new Fair Value Measurements track is designed to give a comprehensive review of the critical issues, evolving standards and guidelines, and other risk factors that affect fair value measurement and reporting. Also, there will be two preconference workshops on November 6: Healthcare Valuation and Litigation Report Writing.

The conference also offers incredible networking opportunities. For details and to register, click here.

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BV movers . . .

People: Michael Collier has joined Duff & Phelps as a managing director in Houston. With more than 20 years at PricewaterhouseCoopers, Collier specializes in due diligence in the oil and gas sector.

Firms: Lewis & Knopf, a full-service accounting and consulting firm with multiple locations throughout the state but headquartered in Flint, Mich., is celebrating the 80th anniversary of its founding this year.

Please send your professional and firm news to us at

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Upcoming CPE events

Income Inaccuracies: Common Errors and Tips to Avoid Them (September 1), with Bethany Hearn (CliftonLarsonAllen LLP) and Sahan Totagamuwa (CliftonLarsonAllen LLP).

Report Writing: Do’s and Don’ts (September 8), with Stuart Weiss (Stuart Weiss).

The Volume or Value Standard: Navigating the Stark Laws (September 13), with Joe Wolfe (Hall Render Killian Heath & Lyman) and Alyssa James (Hall Render Killian Heath & Lyman). This is Part 5 of BVR's Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

The IRS’ Proposed Section 2704 Regulations: The Impact on and the Future of Estate and Gift Valuation (September 29), with Curtis Kimball (Willamette Management Associates).

Important note to webinar attendees: To ensure that you receive your dial-in instructions to BVR’s training events, please make sure to whitelist

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Holiday Break

BVWire will take a break for the Labor Day holiday next week. We will resume publication on September 14. Have a happy and safe holiday!

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We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden (Executive Legal Editor) at:
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In this issue:


Legal take on 2704

ERP at 4.02%

IRS vs. celebs

BV Challenge!

Global BV news


BV movers

CPE events


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