June 12, 2013 | Issue #129-2  

Out and about at NACVA’s annual confab

BVWire is just back from the 2013 Annual Consultants’ Conference held by the National Association of Certified Valuators and Analysts in Washington, D.C. Around 500 attendees were treated to four days of presentations, exhibitors, and networking opportunities for professionals in the field.

The theme of the NACVA conference was “Innovate, Collaborate, Succeed.” The sessions we attended, as well as all of the networking opportunities, certainly lived up to the theme of the conference. Everyone we spoke with had nothing but praise for the conference—the way it was run and the quality of the sessions and speakers.

One of the keynote speakers, Ron Baker (VeraSage Institute), talked about building the firm of the future in part by moving away from a timesheet mentality with respect to billing and moving toward one based on the engagement itself and the value it brings to a client. We asked one attendee who moved to engagement-based billing if he had any trouble with clients over this issue. “No. But you have to sit with the client and explain the billing and what you will be doing for him or her.”

Another attendee said that he does “change orders,” akin to those you may get from, say, a contractor putting an addition onto your house. If the scope of the engagement changes, then you discuss it with the client, show the value-added benefit of the new work, and the corresponding fee that gets added on to the original.

Later on, we heard some interesting nuggets of information. For example, several groups of top valuation professionals and thought leaders have approached the IRS over getting its seal of approval on a sample or template valuation report. This, of course, would be very helpful in that it would take the guesswork out of what to include or not include when writing a report that will come under IRS scrutiny.

Plus, VPS (Valuation Products and Services) unveiled plans for a new DLOM guide and toolkit designed to provide a simpler way to determine and support a DLOM. It’s planned to be released this summer; more details later.

The July issue of Business Valuation Update will have more news and details on the NACVA conference.

It’s out: the new edition of Standards of Value

The much-anticipated Standards of Value: Theory and Application, second edition, by Jay Fishman, Shannon Pratt, and William Morrison (John Wiley & Sons) is now available. Fishman was at the recent NACVA annual conference appearing on behalf of the book. BVWire believes this completely updated edition is the best current authority on applying standards of value in four distinct contexts: estate and gift valuation, shareholder dissent and oppression, divorce, and financial reporting.

But don’t just listen to us. “This book provides the guidance that you can only get by spending countless hours performing research on the subject from multiple sources,” says Gary R. Trugman (Trugman Valuation Associates Inc.). “Even the list of reviewers is so extensive that you know that you are getting a quality product that has been reviewed by many specialists, not just in valuation, but in the law as well.”

The book features new case law in topics including personal goodwill and estate and gift tax and also includes a compendium discussing the standards of value state by state—an invaluable tool.

Says Trugman: “Everyone in our profession should have this book in their library.”

Florida poised to apply Daubert to expert witness testimony

On April 26, 2013, the Florida legislature passed a bill that requires courts to evaluate expert testimony under the Daubert standard. It seeks to align Florida with the majority of state courts that already have adopted Daubert wholesale or in part and the federal courts. Most importantly, the new test will replace the state’s controversial, idiosyncratic Frye standard. Assuming Governor Scott will sign the bill—he has in the past expressed support for Daubert—the law will go into effect on July 1, 2013.

Currently, under the state’s rules of evidence, expert testimony in Florida is admissible if the witness has “scientific, technical, or other specialized knowledge” that relates to an issue in the case and assists the jury. Only when an expert’s opinion concerns a “new and novel” scientific technique does a court test its reliability under the Frye standard, which requires that an expert’s methods be “generally accepted” in the relevant scientific community.

An even bigger hole through which testimony has escaped judicial scrutiny has been the state’s “pure opinion exception” (POE). It provides that, if the expert relies only on his or her personal experience or training, the testimony is admissible without being subject to a Frye hearing. Critics long have complained that the current system takes a “let it all in” approach that has relied on the battle of the experts to resolve expert testimony issues. Worse, perhaps, it forces juries to assess matters of science on which there is not yet a consensus among scientists. 

Under Daubert, the court functions as a gatekeeper, admitting only testimony from a witness who qualifies as an expert in the field, whose testimony is helpful to the jury, is relevant, and is “the product of reliable principles and methods.” Cases building on Daubert expressly have rejected the “because I say so,” or “ipse dixit,” approach that Florida has embraced by way of the POE.

Opponents of the new legislation, in turn, have contended that the introduction of a Daubert-like standard will lead to prolonged litigation because of the resulting Daubert challenges and hearings. Also, the greater the scientific complexity of a case, the greater the burden on the state court hearing the matter. 

We welcome comments from readers who have testified in Florida state cases and others.

Find the bill’s history here.

Mining company values take big hit

The mining industry is having a tough time. In a new report on the world’s top 40 mining companies, the market capitalization of 37 of them dropped more than 17% in the first four months of the year. The report, from PricewaterhouseCoopers, also reveals that the net profit of these companies had fallen 49% last year. The industry is suffering from a "crisis in confidence" about mining firms’ abilities to control costs, deliver on promises, and successfully cope with demands to nationalize resources, the report says.

Dig into the valuation issues of this industry by attending Valuing Quarries & Mines, a BVR webinar airing on Thursday, June 13. Industry experts Michael Nowobiliski and Dwight Davis (both Mid-American Energy and Mining Services) will address the classic issues and emerging trends in appraising mineral extraction concerns. Through case studies and an examination of key market- and firm-based value drivers, Nowobiliski and Davis will cover the best practices in quarry and mine valuation.

Data for healthcare compensation valuation

There is much data on healthcare compensation available on the market. For example, a new report from Medscape Today found orthopedic surgeons earn the most, with a mean income of $405,000. But often, published data are misused by healthcare appraisers.

This very issue is addressed in Part 6 of BVR’s 2013 Online Symposium on Healthcare Valuation on Tuesday, June 25. In Critical Issues in the Use and Application of Market Survey Data and the Market Approach in Healthcare Compensation Valuation, expert Timothy Smith (Touchstone Valuation) will cover what every appraiser needs to know when applying data from compensation surveys in the healthcare field.


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