They’ve thrown down the gauntlet! Mark Dietrich and Tim Smith will debate anyone who disagrees with their views on the fair market value of physician compensation. And BVR will provide a public forum that will include anyone who takes up the challenge. “Anywhere, anytime!” they proclaimed during a recent webinar.
New paradigm: Dietrich and Smith refute conventional wisdom regarding the compensation hospitals pay to employ physicians and offer an alternative approach to determine fair market value. Two issues are key to this matter: the use of compensation survey data and physician relocation. These issues and their new approach are fully explained in their recently published book, the BVR/AHLA Guide to Valuing Physician Compensation and Healthcare Service Arrangements, 2nd edition.
One of the problems with surveys is that they are not based on random samples and the same organizations are reporting to at least two different surveys, they say. Also, survey data are not always consistent with information about collections in the very same surveys. On the “relocation myth,” hospitals feel that, if they don’t pay their physicians at least the median compensation for their specialty, the physicians will relocate to earn more. But Dietrich has done extensive research on physician mobility that disproves this notion. Instead of paying physicians the median compensation, hospitals could set fair market value compensation based on the resource-based relative value scale (RBRVS), they say. Business Valuation Update subscribers can read a recap of the webinar in the March issue. You can also listen to an archive version of their webinar if you click here.
Go time? Are you willing to take up the challenge? Contact us at info@bvresources.com. We’ll set it up!
Professor Aswath Damodaran (New York University Stern School of Business) has posted a series of data updates on his blog, “Musings on Markets.” The posts include “Taxing Questions on Value,” “The Currency Conundrum,” “Country Risk Update,” “A Cost of Capital Primer,” “Growth and Value—Investment Returns,” and others. In his latest post, “Debt and Taxes,” he points out that one of the biggest impacts of tax reform will be on the tax benefits of debt, which will be dramatically decreased starting this year, primarily because of the lower marginal tax rate and the limits on interest tax deductions. He concludes: “The new tax code has not removed the tax benefits of debt, but it has substantially reduced them, and we should expect to see less debt overall at companies, as a consequence. In my view, that is a positive for the economy, since debt magnifies economic shocks to businesses and not only creates more volatile earnings and value, but deadweight costs for society.”
The new tax law contains some special breaks for certain industries. During a webinar, Valuing Wineries in 2018—An Update, Keith Meyers (Perkins & Co.) and Chris Meineke (Brotemarkle, Davis & Co.) presented some key highlights of the changes for the wine industry. The new tax law:
Expands the excise tax credit for all wineries. The legislation does away with the existing phaseout based on production size and allows all wineries to claim a credit of between $0.535 and $1 per gallon on the first 750,000 gallons of production. The total value of the full credit is $451,700 per year, based on producing the full 750,000 gallons.
Allows sparkling wine to qualify for the credit. For the first time, sparkling wine is eligible to receive the tax credits mentioned above.
Increases the alcohol by volume (ABV) allowed for the $1.07 tax rate from 14% to 16% ABV. Wines with 14% to 16% ABV are currently taxed at $1.57 per gallon and will now be taxed at the still wine rate of $1.07 per gallon.
Increases the carbonation allowed in certain low alcohol wines (8.5% ABV or less) taxed at the $1.07-per-gallon rate from 0.392 to 0.64 grams of carbon dioxide per hundred milliliters.
The International Valuation Standards Council (IVSC) and The Appraisal Foundation (Foundation) have released an updated standards harmonization guide, A Bridge From USPAP to IVS 2018: A Guide to Producing IVS-Compliant Appraisals(the Bridge). First launched in June 2016, A Bridge From USPAP to IVS sets out the additional steps to be taken by appraisers already accustomed to providing USPAP-compliant appraisals to make valuations IVS-compliant. This revised edition reflects the latest (2017) version of the IVS, which are increasingly being applied throughout the world, and the latest (2018-19) edition of USPAP (which became effective on Jan. 1, 2018), the generally accepted standards of the U.S. appraisal profession.
A jam-packed audience had many questions during the first public demo of Duff & Phelps’ new Cost of Capital Navigator, an online application that will replace the print versions of the Valuation Handbook series. A question many in the audience had was: Can you use the Navigator for very small companies, such as a market cap of less than $5 million or companies that would fall into CRSP Decile breakdown 10Z?
Absolutely, yes, said Jim Harrington, part of the team at Duff & Phelps that developed the tool that can be used to value all size companies. There is risk premia based upon sizes across the size spectrum including the smallest breakout (10Z) of CRSP Decile 10, which is broken out as a 10W, 10X, 10Y, and 10Z, he said. It is completely appropriate to use the Navigator to value very small companies, he added, and you can also use the Risk Premium Report, which has 25 portfolios from the largest companies, Portfolio 1, down to the smallest, Portfolio 25. The Navigator will be available in February 2018.
The application will initially embody the Duff & Phelps Valuation Handbook – U.S. Guide to Cost of Capital, which will no longer be published in hardcover form. The other handbooks in the series will later be incorporated into the new tool. To access a recording of the demo as well as see more details, go to www.bvresources.com/Navigator.
Extra: Duff & Phelps will give a presentation on its new data format at the 2018 Southeast Chapter of Business Appraisers (SECBA) conference February 9-10 in Atlanta.For more information and to register, click here.
BVWire attended last year’s ASA/USC Fair Value Conference, and it looks like this year’s version will be another top-notch event, which will be in Los Angeles on May 10 at KPMG. This is the 13th edition of this conference, with leading speakers covering a range of fair value measurement and valuation topics, as well as other current and future expected trends regarding the FASB, SEC, and international accounting standards. This event is not only of interest to appraisers, but to auditors and financial executives as well. A detailed schedule will be available soon, and you can register if you click here. There’s an early-bird discount if you sign up before March 1, and there’s also a discount for alumni of the University of Southern California.
The latest news in the business valuation profession—plus complete coverage of recent court decisions—is provided in two new guides from BVR. The Business Valuation Update Yearbook, 2018 edition, covers the most innovative approaches and techniques, leading conferences, new court decisions, and changes in regulations and standards in the profession with on-the-ground reporting from valuation experts, thought leaders, and the BVR editorial team. The Business Valuation Case Law Yearbook, 2018 edition, represents BVLaw’s analysis of the most noteworthy court decisions of 2017 in the areas of shareholder, bankruptcy, contract, intellectual property, ESOP, federal tax, or marital litigation. The collection is a deep source of teachable moments—about legal principles, valuation methodology, and the act (art) of presenting expert opinions. It also contains the court opinions and a case listing by state/jurisdiction, court, and case name, followed by a short description of the key valuation issue of each case.
The Saudi Authority for Accredited Valuers (Taqeem), the regulator for the valuation profession in the Kingdom of Saudi Arabia, has celebrated the first graduation class of Accredited Valuers, Taqeem’s valuation designation. The graduates, 105 real estate valuers and 31 business valuers, include Muath Alkhalaf, the head of the business valuation sector at Taqeem and the first female designated business valuer, Nouf Al-Toaimi. Taqeem, as a member of the IVSC, has been working on the localization of the standards and introducing it to all Arabic-speaking valuers across the Arabic-speaking countries. The group is also a member of the International Institute of Business Valuers (iiBV), which provided assistance with business valuation education, consulting, and assistance throughout the accreditation process. To read more and to see a video of the graduation, go to iiBV’s website.
People: Zach Reichenbach has been promoted to principal in the Forensic and Valuation Group at Ellin & Tucker of Baltimore … Ericka Heiser has been promoted to director at Ketel Thorstenson LLP of South Dakota, where she manages the firm’s Valuation Services area … Jessica Giresi is the recipient of the Leonard H. Smith Strength of Client Service Award from her firm, WithumSmith+Brown PC; she’s a senior manager within the Forensic and Valuation Services Group … Chicago-based Crowe Horwath LLP has announced that Jim Powers has been reappointed as CEO; his term is extended to March 31, 2021 … Jeffrey R. Vaughn has been promoted to manager at Grossman St. Amour CPAs PLLC in Syracuse, N.Y.
Firms:Atlanta-based Aprio LLP has acquired RRB Business Services LLC, also in Atlanta; it’s a full-service CPA and consulting firm… Lutz bolsters its presence in Nebraska with the acquisition of Shonsey & Associates; the deal is expected to be effective May 1, 2018…Two New Castle, Del., firms, Maillie LLP and Rowland, Johnson and Co., have merged; the combined firm has 13 partners and over 100 employees … New York City-based PKF O’Connor Davies is a winner of the 2018 Age Smart Employer Awards from Columbia University that recognizes organizations that hire, retain, and engage workers of all ages … Prairie Capital Advisors Inc. has moved its headquarters to One Lincoln Centre in Oakbrook Terrace, Ill., to allow for current and future growth … Southwest firm Weaver has acquired the tax practice of Houston-based Condon & Co., adding three partners and seven employees to the firm.
Included in this presentation will be a summary of how to adjust the Van Vleet model (for S corp tax affecting) to reflect the various tax changes as well as the temporary and permanent characteristics of the new tax law.
The often-misunderstood relationship between capital expenditures and depreciation, and the appropriate treatment of limited life items such as amortization in DCF analyses are examined. Also, learn how changes in the corporate tax rate and capital expenditures impact DCF analysis.
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