The final word on SSVS-1 compliance: Check your local laws

“I respectfully disagree…that SSVS-1 only applies to CPAs who are members of the AICPA,” writes Ted Israel (Eckhoff Acountancy, San Francisco), responding to our coverage of the California Devries case and comments in last week’s BVWire™. “The notion that non-member CPAs are exempt from the AICPA’s standards is a fallacy,” he says. For example, California accountancy regulations require all state licensees to comply with “all applicable professional standards,” including but not limited to generally accepted accounting principles and auditing standards. The AICPA promulgates the latter, Israel points out, and SSVS-1 falls squarely into the professional standards category. “I doubt that California is unique,” he says.

Indeed, we had subscribers from Colorado (Ron Seigneur), Massachusetts (David Goodman), Texas (S. Todd Burchett), Florida and New Jersey (Linda Trugman), Utah (Carl Steffan), North Carolina (Dennis Newman), Louisiana (Jason MacMorran), Michigan (Christine Baker), Alabama (Robin Taylor), and Arizona (Kevin Yeanoplos), send the same important message:

Please make sure your readers note that SSVS-1 may be binding on CPAs whether they belong to the AICPA or not, depending on a state’s particular licensing laws and accountancy regulations.

Of the current 55 licensing jurisdictions (all 50 states plus D.C., the Virgin Islands, Samoa, Puerto Rico, and the Northern Marianna Islands), the vast majority—perhaps as many as 45, require some form of compliance with the AICPA Code of Conduct and/or its professional standards. “Some appear to have interesting carve-outs and references to other rules,” Seigneur notes, “so this is another relevant aspect of compliance, and something that needs clarification within each jurisdiction.” Members of the AICPA/FVS are currently researching the issue and its notable subtleties. In the meantime, “I commend your readership to read SSVS-1 thoroughly and know their states accountancy regulations and family law case law,” Israel says. Not only to ensure individual compliance—but also to use when reviewing the work of opposing CPA/experts.

Goodbye to FAS 157, 141R, 142… hello to the new Codification

If the world of financial accounting wasn’t complicated enough, last summer the Financial Accounting Standards Board issued Statement No. 168, The FASB Accounting Standards Codification™ and Hierarchy of Generally Accepted Accounting Principles (FASB ASC). On its effective date (for financial statements ending after Sept. 15, 2009), the FASB ASC became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, superseding all then-existing, non-SEC accounting and reporting standards for the same. To provide further guidance, later in the year, the FASB issued its Notice to Constituents (v 3.0): Accounting Standards Codification™, About the Codification.

More recently, the AICPA has posted Financial Accounting Standards Board Accounting Standards Codification™, Overview and Recent Developments. “The U.S. accounting and reporting standards (for nongovernmental entities) as we know them cease to exist as authoritative guidance,” it says. “That means no more FASB statements and interpretations, AICPA accounting Statements of Position (SOPs), and so forth. Those standards that you’ve come to memorize [such as FAS 141R, 142, etc.] have a new FASB ASC reference to which you can refer.” Of course, the overhaul from a standards-based model (with thousands of individual standards) to a topically based model (with roughly 90 topics) is meant to simplify user access—but the new system will take time for analysts, auditors, and accountants to learn and apply.

Live, from NY: Get the latest updates on all things fair value

There’s still time to register for BVR’s 3rd Annual Summit on Fair Value for Financial Reporting in New York City on February 1-2, 2010. Registrants will hear the latest on impairment testing, purchase price allocation, complex securities, debt instrument valuation, and more—including the current proposed amendments to the AICPA’s Practice Aid (valuation of privately held equity securities issued as compensation).

Can’t get to New York for two full days? For the first time, BVR is broadcasting its Fair Value Summit in “real time,” providing busy practitioners the opportunity to attend any or all sessions via live webcast. For more information and to register, click here.

How appraisers can ‘get it right’ in reasonable royalty cases
Remember last week’s write up of Veritas Software Corp. v. Comm’r, 2009 WL 4723602 (Dec. 10, 2009), a $1.5 billion-dollar transfer pricing case? It’s now being hailed as a landmark decision relating to the valuation of cost-sharing buy-ins. In addition to rejecting the IRS’s traditional theories, the court also addresses the Obama administration’s recent efforts to “clarify” the definition of intangible property under Sec. 482 (transfer pricing regs) to include workforce in place, goodwill, and going concern value—a “clarification,” the court says, which could nevertheless raise nearly $3 billion dollars in tax revenues over the next ten years.

Given the current proposals and potential for raising revenues, don’t expect the IRS oversight of transfer pricing arrangements to wane, despite its recent loss in Veritas (which ultimately hinged on its expert getting the intangible assets and financial assumptions wrong). In fact, the IRS is currently hiring more economists, and its scrutiny of these cases should continue to intensify, says David Jarczyk, author of “Increased IRS Transfer Pricing Regulation Increases Opportunities for Appraisers,” in the recent (Sept. 2009) Business Valuation Update™.

Takeaway for appraisers. “With respect to intangible property cases, solid documentation and a thorough review of assumptions and comparables is crucial,” says Jarczyk, current COO of ktMINE. “For example, a practitioner should not use royalty rates without reading the actual license agreements and filings. There are too many variables the IRS can scrutinize with respect to royalty rates and license agreements that can materially impact one’s analysis.” For more information, visit ktMINE.

New source for executive compensation (NW)

The 2009 - 2010 Northwest Executive Compensation Survey (by Milliman, and offered exclusively to appraisers through BVResources) compiles compensation information from over two hundred NW companies for the top five executive positions, including CEOs, CFOs, COOs, chief technology officers (CTOs), and top marketing/sales executives. The survey data provide:

  • base salaries
  • bonuses
  • total cash compensation
  • equity compensation
  • pay relationships to CEO
  • perquisites
  • incentive plan performance measures
  • long-term incentive plans
  • long-term incentive program changes
  • equity ownership
  • retirement plans
  • annual pay adjustment trends

We’ve never seen a compensation survey with this much detail related to one particular U.S. region. Stay tuned for more Milliman surveys from additional regions…

More evidence the 2010 M&A market is improving

“After a challenging start, 2009 ended with some positive momentum,” says Mike Rosendahl (PCE Investment Bankers). ”As the year progressed, the M&A markets became more comfortable with the state of the economy and the initial stages of the recovery . . . leading many to believe that 2010 has the potential to be a better year for M&A transactions.” In addition, a new report from Towers Watson and Cass Business School determined that acquisitions by publicly traded companies in 2009 outperformed the market, Rosendahl says, “providing evidence of the value that acquisitions offer.”  For the full report, “State of the M& Markets, 4th Quarter 2009,” including the latest, year-end, summary transactions data, contact Rosendahl directly or check PCE’s Investment Banking page.











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