FASB gets busy in Q1 2008

On its immediate agenda, the Financial Accounting Standards Board (FASB) plans to release the final Statement 133 Implementation Issue No. E23, Clarification of the Application of the Shortcut Method, later this month.  After releasing the exposure draft last summer, the FASB will address the following in its final guidance:

• Swaps that have a non-zero fair value at inception; e.g., the difference between the transaction price (zero) and the fair value price (exit price, as defined by SFAS 157) is solely attributable to a bid-ask spread.
• Hedged items that have a settlement date subsequent to the swap trade date.

The Board declined to re-deliberate any additional items, and designated the effective date of the final Issue for hedging relationships on or after January 1, 2008.  For a project update, click here.

Also this quarter, the FASB plans to discuss “whether the recognition provisions in Statement 141R should be applied to assets acquired outside of a business combination,” according to the project update of FAS 2, which focuses on acquired in-process research and development (IPR&D).  The Staff expects to issue a proposed FSP during Q1 2008.

During the same time, the Board will discuss FAS 144 and “whether fair value is the appropriate measurement attributable for assets held for sale” as opposed to “fair value less cost to sell,” as currently required.  (Update available here).  But it has removed from its current agenda the proposed FSP FAS 144-c, Classifying and Accounting for a Depreciable Asset as Held-for-Sale When an Equity Method Investment is Obtained; the update does not provide further explanation.

TAF Boards seeks comment on future of USPAP

The Uniform Standards of Professional Practice (USPAP) is now twenty years old.  Recent changes during its evolutionary growth include revisions to the Scope of Work Rule and the decision to combine publishing, on a biennial basis, of the document with Advisory Opinions and FAQs.  Together the Appraisal Standards Board (ASB) and the Appraiser Qualifications Board (AQB) are evaluating USPAP and USPAP education.  They have jointly issued an Invitation to Comment (ITC) to appraisers and users of appraisers to gather information.  “Both Boards would like to take time in 2008 to expand and enhance their relationships with appraisers…who rely on USPAP,” says the ITC.  (They made a special effort, by directly contacting the BVWire™ and the ASA E-Update, to reach BV appraisers.)   “We want to hear from all parties, and we will be proactively engaging a wide array of market participants in many different forums to discuss the future direction of USPAP.”  Their questions include:

• Is USPAP maintaining a high level of public trust?
• Is it understandable to appraisers and the public?
• Is it enforceable?

The Boards hope to have written comments by February 25, 2008 by mail, fax, and email (comments@appraisalfoundation.org).  They will also solicit oral comments at two full-day, public meetings of the ASB and AQB on March 3, 2008 (Los Angeles) and June 6, 2008 (Atlanta).  For more information, including the mailing address and fax number for comments, go to The Appraisal Foundation and click on the ITC item under “News.”

Correction:  In the last issue of BVWire, a headline incorrectly referred to the “Appraisal Institute” when the article clearly referred to “The Appraisal Foundation.”  Thanks to Carla Glass for being the first to point out the error.  And our continuing thanks to Jay Fishman for his reminders for BV professionals to become involved in TAF activities.  Finally, we appreciate all subscriber input on the current impact of USPAP.  Do BV people feel the same urgency about USPAP as real estate appraisers do, especially since only the latter can lose their licenses as a result of a USPAP infraction?  Please email comments on this or any significant BV topic to the editor.

IRS tops valuation downloads

Nearly 1000 visitors downloaded the IRS BV Guidelines in 2007, which is just one of over thirty free valuation downloads at BVResources.com.  The second most popular: “Goodwill Hunting in Divorce,” is a current, case-by-case summary on the distinction between enterprise and professional goodwill in U.S. jurisdictions.  Keep in mind that these downloads were available all year long, and while the Goodwill summary garnered over 800 downloads, the one on “Quantifying Specific Company Risk”—released in early 2007—was captured by over 730 visitors.  And “Comparing the Simplified Model to the Traditional Model” (excerpted from Fannon’s Guide to the Valuation of Subchapter S Corporations), which was just made available during November 2007, was downloaded over 220 times.

New Goodwill overview:  The latest free download is “Goodwill: Where Are We? How Did We Get Here? What Do We Do About It?”  This introduction to BVR’s Guide to Personal v. Enterprise Goodwill, 2008 edition, is written by David Wood and provides an excellent summary of the key issues.  To be among the first to download the article, click here.  

‘Authenticity crisis’ in e-discovery, and
astronomical costs

There could very well be a looming “authenticity crisis” in the discovery and documentation process of civil litigation in general—and valuation-related litigation in particular, according to presenter Tom Hilton (Anders Minkler & Diehl LLP, St. Louis) at this week’s National CLE Conference in Vail, Colorado sponsored by the Legal Education Institute (LEI).  The newly amended Federal Rules of Civil Procedure have now put the discovery of electronically stored information (ESI) on par with paper documents.  With the plethora of ESI—including innumerable electronic drafts of documents, “Is there such a thing as ‘an original’ anymore?” Hilton asks.  How does one prove authenticity in the Information Age?  Further—how do you request the most useful form of ESI if you don’t know the respondent’s systems?  How do you discuss preserving ESI when you may not know what or where it is?   When the parties can’t agree on the form of production, are courts technologically adept enough to decide for them?

Hilton sees “full employment” for forensic technology consultants.  His firm has already aligned with a data recovery firm and introduced them to local attorneys.  “We have a cottage industry that will become huge,” he predicts—and costly.  A recent litigation engagement lasted 2 ½ years and took 16 days to try.  On the date of the alleged breach, the plaintiff—after giving required notice—walked into defendant’s business and with the help of federal marshals, seized the server to preserve all ESI in as pristine condition as possible.  It took 8 days, 24 hours per day, to download the data—and by the end of the case, the fees for Hilton’s firm amounted to $2.1 million, while the 40 attorneys billed over $50 million.

In that case, the plaintiff (who retained Hilton’s firm) owned the server.  “I’m waiting for the call from an attorney who says, ‘where is it possible to find the information you need?’”  In the meantime, it’s easy to find the amended federal rules, available here.

IRS considers Jelke appeal

The IRS requested an additional two weeks—until January 16, 2008—to decide whether to file a motion for reconsideration en banc in Jelke v. Commissioner.  “That would be asking the entire 11th Circuit to address the issue,” explains John Porter (Baker Botts, Houston).  The Service likely requested the extra time to accommodate the end-of-the-year holidays.  The motion for reconsideration would be the first step in the appeals process.

Porter will be joining appraisers Will Frazier (HFBE, Houston) and Michael Paschall (Banister Financial, Charlotte, NC) in the first BVR telephone conference this year.  The experts will discuss the many ramifications of the Jelke reversal, one of the biggest decisions in 2007, in which the 11th Circuit approved dollar-for-dollar reduction for embedded capital gains.  Register for the conference—which takes place January 17th—by clicking here.

Where else can you market to 600 attorneys?

More from the National CLE conference in Vail:  Over six hundred attorneys from nationally prominent practices attended the 25th annual gathering that spanned over five days, from January 4 - 9, 2008.  This year the BV presenters did double, triple—and in the case of Nancy Fannon, quintuple duty, presenting at numerous sessions across the conference’s many tracks, including bankruptcy, BV, tax, civil litigation, family law, intellectual property, healthcare, and real estate.  Cindy Collier, for example—who presented a talk on fair market value to healthcare attendees—found three former chairs of the ABA sitting in the front row.  “It was fabulous,” she said.  “What an honor.”   And what recognition, too, as Tom Hilton confirms.  “Interestingly, a litigator from my hometown noticed my e-discovery topic and asked me to present it to their entire litigation department at their monthly group meeting in March,” he says.  “We do these things without any real expectation that something tangible will spring from it.....We sow seeds, provide water and sun and eventually they germinate.”

Ron Seigneur, who put on six different talks across the various tracks, reminds his colleagues that attorneys still comprise the vast majority of client referrals from which to “grow” a practice.  The annual LEI National CLE conference—which is held the first week of every New Year in a Colorado mountain resort—may offer the most fertile venue for BV business development.  Oh—and the foot of fresh powder this week didn’t hurt the extracurricular activities, either.  For more information, check out the LEI website. 

Limited three-for-one offer

Appraiser and certified national speaker Mel Abraham has extended a special holiday offer for valuation professionals, attorneys, financial advisors, and their clients.  He has bundled three of his most popular audio presentations, plus accompanying materials: 

• Here Comes the Judge!—Valuation & Case Law Update
• Subsequent Events—Is There Life After Death or Gift?
• Through A Microscope—Look Who's Watching Now! 

The last item discusses the Pension Protection Act of 2006; it includes an article by Abraham that discusses the PPA provisions in detail and their impact on appraisers and practitioners.  Until the end of January, all three (normally $97 to $137 each) can be purchased for a total of $127.  Go to ValuationEducation.com, and click on the “special holiday offer."