BVWire Issue #177-1 | June 7, 2017


New fair value regs and credential in spotlight at ASA event

It’s conference season, and BVWire has hit the road to keep you up-to-date on key matters facing the profession. There was a record attendance at the 12th Annual Fair Value Conference on the beautiful campus of the University of Southern California in Los Angeles. Co-organizers Ray Rath (Globalview Advisors) and Professor Tom Ryan (USC Leventhal School of Accounting) greeted an eager crowd at what has shaped up to be the best conference of its kind.

CEIV: A lot of the talk at the conference was around the new credential for fair value for financial reporting: Certified in Entity and Intangible Valuations™ (CEIV™). The ASA has already begun to issue the credentials (and so has the AICPA). Being in its infancy, the program is undergoing refinements and ongoing development. For example, the questions in the first half of the exam (fair value body of knowledge) are being tweaked. There’s also some concern that the body of knowledge training is too basic for experienced practitioners, so they should be exempt from that part of the training (but not the exam).

At the conference, a panel of auditors from the Big Four all agreed that the fair value efforts are “on the right track,” but they are taking a “wait-and-see” attitude on it. One concern is over the quality control process, which is still under development. All CEIV holders will have to submit a report and work file in the first year for a compliance review. The review will focus on compliance with the Mandatory Performance Framework (MPF), which is a set of best practices all CEIV holders must follow. However, it’s anticipated that anyone doing fair value for financial reporting will be expected to comply with the MPF. While some people say the MPF doesn’t require any more work, some disagree and point to the demanding requirements for documenting your due diligence on prospective financial information.

Other key matters: Many other fair value issues were discussed at the conference—here are just a few main points:

  • Ratios will change overnight when FASB’s new revenue recognition and lease accounting rules start to kick in;
  • The PCAOB will soon issue new standards on auditing fair value measurements (scheduled for June 30);
  • Comment letters are being reviewed on The Appraisal Foundation’s exposure draft on valuing contingent consideration; final version TBA;
  • Dilution from future issuances of securities can have a big impact on the values of existing securities, but guidance is limited;
  • The International Valuation Standards Council will form a new board on financial instruments; and
  • The AICPA is working on a new credential for financial instrument valuation.

We’ll give you more takeaways on other matters next week!

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In controversial move, Tax Court tackles ‘double inclusion’ problem

Given the unfavorable optics of a recent case, the Tax Court’s finding that the value of assets transferred from the decedent to a family limited partnership was includible in the value of the decedent’s gross estate is not surprising. What makes the decision noteworthy is that a majority of judges, on its own, came up with a novel theory of calculating the includible amount, ostensibly to prevent double inclusion. A group of judges, concurring in the result only, opposed the majority’s activist approach.

One day after doctors declared the decedent incapacitated, one of her sons acting as trustee, transferred cash and securities to a family limited partnership (FLP) in exchange for a 99% limited partner (LP) interest. That same day, under a power of attorney, the son then transferred the decedent’s 99% LP interest to a charitable lead annuity trust. The decedent died a week after the transactions. There were no business operations. The parties stipulated the transferred assets were worth $10 million.

In Tax Court, both sides filed summary judgment motions to resolve the dispute pretrial. The IRS presented a number of theories why the value of the transferred assets was includible in the gross estate. The Tax Court ultimately found section 2036(a)(2) of the Internal Revenue Code applied because the decedent, acting with her sons, had the ability to dissolve the partnership and designate the beneficiary of the transferred property or the income from it.

The court’s majority then launched into an extended discussion of how much value was includible. Concerned over “double inclusion,” the majority invoked section 2043(a) to limit the amount includible under section 2036(a). It held that section 2036(a), when applicable, would include in the decedent’s estate only the excess of the value of the transferred assets over the value of the partnership interest issued in return. Under this formula, it is not the full $10 million that would be brought back into the estate but only “the amount of any discounts (that is, the doughnut holes) allowed in valuing the partnership interest,” the court said. Here, the estate valued the decedent’s limited partner interest at $7.5 million based on a prior appraisal that applied a 25% discount for lack of marketability and lack of control.

Writing for those who only supported the result achieved in the case, one judge said he saw no “double inclusion” problem. In the past, the court took a “straightforward path,” which was to disregard a “transfer with a string” and simply include the value of the property before the transfer. This should have been done here. The majority’s new theory was unnecessary in that neither party had advocated for it. This was “a solution in search of a problem.”

The case is Estate of Powell v. Commissioner, 2017 U.S. Tax Ct. LEXIS 19 (May 18, 2017). A digest of the decision, as well as the court’s opinion, will be available soon at BVLaw.

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A few more nuggets from the NYSSCPA BV event

BVWire attended the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) in New York City. In our last issue, we gave you a few takeaways—here are a few more. We’ll have full coverage in the July issue of Business Valuation Update.

Is BV a profession? This was the title of the presentation by Mark Zyla (Acuitas Inc.), who focused on the recent developments in fair value measurements. Unlike accountants and lawyers, Zyla pointed out that valuation professionals do not have common education requirements, a single identification in the marketplace, a single set of standards, nor a disciplinary mechanism. The new efforts around the CEIV credential for fair value is a step in the right direction, and comments from the SEC, a critic in the past, are positive so far.

DLOM deluge. There are close to 75 methods for estimating a discount for lack of marketability “with more arriving on a regular basis,” said R. James Alerding (Alerding Consulting LLC) and Pasquale Rafanelli (Grassi & Co.) during their session. One new method they mentioned was an expansion of the Mandelbaum analysis they call “Mandelbaum on steroids”—it inflates the framework from the original nine factors to 40. But this may open the expert up to more points of attack.

Estate tax limbo: Amid uncertainty over estate tax reform, attorney Ladidas Lumpkins and valuation and forensics expert Alfred Pruskowski (Prager Metis CPAs LLC) advised the audience to “stick to the status quo” for the foreseeable future in terms of issues such as estate tax freezes and intentionally defective grantor trusts (IDGTs) and to consider spousal limited access trusts (SLATs) and dynasty trusts (to preserve tax-free status forever). Also, take full advantage of existing discounts while the proposed Section 2704 regs are in flux.

New York LLC law reform. One of the “more obvious shortcomings” in New York’s LLC law is the absence of a fair value buyout provision in judicial dissolution cases, such as the one found in New York’s Business Corporation Law. CPA and valuation expert Edward F. Esposito and attorneys Peter A. Mahler (Farrell Fritz PC) and Bruce Rich (Carter Ledyard and Milburn LLC) said that most states have upgraded their LLC statutes—but not New York. They also urge the state to resolve the growing debate and lack of clarity over DLOM in fair value proceedings. By the way, Mahler has a great series of podcasts on business divorce in New York, including one with Chris Mercer (Mercer Capital), who was one of the experts in the AriZona case.

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Valuation benchmarks for ambulatory surgery centers revealed in updated survey

For the past 24 years, HealthCare Appraisers Inc. has interviewed ambulatory surgery centers (ASCs) to determine trends in the value and characteristics of ASC ownership interests. They have just released the “2017 ASC Valuation Survey” for which they compiled data from 24 respondents, representing well over 700 surgery centers throughout the country. Here are just a few of the findings:

Single-specialty centers:

  • 78% of respondents reported valuation multiples of 6.0x to 7.9x EBITDA; and
  • 23% of respondents reported valuation multiples of 4.0x to 5.9x EBITDA.

Multispecialty centers:

  • 75% of respondents reported valuation multiples of 7.0x to 7.9x EBITDA; and
  • 25% of respondents reported valuation multiples of 4.0x to 5.9x EBITDA.

Learn more: There are a number of nuances to valuing ASCs. BVR recently conducted a webinar, Current Trends in Ambulatory Surgery Center Valuations, with Robert Mundy and Angie Smith, who are both with Ankura Consulting Group.

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AICPA issues its first wave of CEIV credentials

The American Institute of CPAs (AICPA) has doled out its first batch of certifications for the new Certified in Entity and Intangible Valuation™ (CEIV™) credential. The individuals who have attained the credential are: Gary Roland (Duff & Phelps), Marianna Todorova (Duff & Phelps), Chris Lopp (HoganTaylor), Geoffrey Dennis (KPMG), David Larsen (Duff & Phelps), Jeff Hanson (Jeff S. Hanson, CPA), Andy Smith (The McLean Group), Travis Harms (Mercer Capital), Susan Saidens (SMS Valuation & Financial Forensics) and Steven York (Stern Brothers Valuation Advisors). BVWire congratulates these individuals!

Extra: The AICPA has a series of fair value quizzes designed to test your understanding of specific topics within the fair value measurement competency model. Try them out—you’ll get your results instantly. Also, BVR has a recent webinar that explains the credential and how to get it.

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A new candidate for management interviews?

So there you are, on a site visit, and the busy CFO can’t see you right away. “You can talk to my assistant in the meantime,” the CFO says. “She’s right here—you can ask her anything.” You look around, and there’s no one else in the room. “Ask who?” you query. “She’s right in front of you! Alexa, can you give me the trailing 12 months of EBITDA?” The CFO is talking to a small cylindrical gadget on the desk that obeys the command. Far-fetched? No, because voice input to accounting systems is coming, maybe soon, according to an article in AccountingToday. That gadget could be the Echo, which is connected to Amazon’s Alexa Voice Service over the internet and can interact with other internet-connected devices in the home or office. Will it help you get the information you need? We’ll see. Hopefully, business owners won’t be asking, “Alexa, what is my company worth?”

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Get real-time tips and advice from NACVA’s annual conference

BVWire is in Chicago at the annual conference of the National Association of Certified Valuators and Analysts (NACVA). We’ll be attending some of the many sessions that promise to offer very timely tips, advice, and new thoughts on a variety of issues, including DLOM, goodwill, cost of capital, fair value, report writing, and more!

Follow us! We’ll be sending out tweets while we’re in these sessions:

No Twitter account? You can still read our tweets at

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Global BV News

Romanian VPO joins iiBV

The National Association of Romanian Valuers (ANEVAR) is the newest VPO member of the International Institute of Business Valuers (iiBV). ANEVAR is an independent (not-for-profit, nongovernmental) organization for the real estate, business valuation, personal property, and financial assets disciplines in Romania. ANEVAR supports 6,900 professional members and over 250 associated legal entities, carrying out valuation-related activities in 40 territories and counties and 11 centers in Bucharest. They join the other iiBV members: Canadian Institute of Chartered Business Valuators (CICBV), China Appraisal Society (CAS), National Association of Valuers of Serbia (NAVS), and The Saudi Authority for Accredited Valuers (Taqeem).

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IACVA/SECBA sets conference agenda for Atlanta

You don’t have to travel overseas to get an update on what’s going on around the world in the valuation profession. Come to Atlanta October 20-21 for “Valuations in the Future,” the theme of the annual conference of the International Association of Consultants, Valuators and Analysts (IACVA) and the Southeast Chapter of Business Appraisers (SECBA). There will be sessions on an economic update, valuations in China, medical valuation “nightmares,” understanding BlockChain, M&A valuations, goodwill, fairness opinions, and more. For more information, contact Robert Brackett. BVWire attended last year—and we’ll be there this year also!

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BV movers . . .

People: Harold Deiters III, partner-in-charge of the litigation and valuation consulting team in the New York City regional offices of Baker Tilly, has been installed as president of the New York State Society of CPAs. Deiters’ one-year term began June 1 … Baton Rouge, La.-based Postlethwaite & Netterville announced director Dan Gardiner will be the firm’s next CEO and managing director, taking over for current CEO Bill Balhoff in May 2018 … Edward Guttenplan, managing shareholder at Wilkin & Guttenplan in East Brunswick, N.J., was named president of the New Jersey Society of CPAs, beginning a one-year term June 1 … Judith Kornfeld, CEO of Philadelphia-based ESOP Economics, has been elected chair of the board of the National Center for Employee OwnershipPaul Weisinger, a partner in Walthall CPAs’ Cleveland office, was named to NACVA’s Valuation Credentialing Board.

Firms: BKD is adding the employees of Paragon Audit & Consulting to its Denver office … The Bonadio Group’s offices in Rochester, N.Y., and Albany, N.Y., were listed among the 2017 Rochester Democrat and Chronicle Top Workplaces and the Albany Times Union Top 25 Small Companies, respectively … Cincinnati-based Clark Schaefer Hackett unveiled a new logo, color palette, and tagline: “Results Through Remarkable Relationships” … CliftonLarsonAllen has acquired Glendora, Calif.-based firm Vicenti, Lloyd & Stutzman. Vicenti’s employees will remain at their offices in Glendora and Los Angeles … Eide Bailly of Fargo, N.D., has added Roth & Co. of Des Moines, Iowa, effective June 26.

Please send your professional and firm news to us at

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CPE events

Emerging Markets for Minority Interests (June 13) with Christine Baker (Charter Capital Partners) and Charles Sheridan (Huron Capital).

Valuing Loan Guarantees (June 15) with Gary Schurman (Applied Business Economics). Part 6 of BVR's Special Series on Banking and Financial Services.

BizMiner: Dig Into the Data with Powerful Upgrades and Client Friendly Outputs (June 20) with Jon Brandow (BizMiner).

Restaurant Valuation: Industry Segments, Trends and the Impact of Real Property (June 22) with Franz Ross (KeyBank).

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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New and Trending
LinkedIn Discussions

The Level of Valuation of M&A Midmarket in Europe at the Beginning of 2017

Two Truths and a Lie With Professor Aswath Damodaran

Excel Shortcuts Cheatsheet

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In this issue:

ASA FV conference

Double inclusion


ASC multiples


Talk to Alexa

Tweet tips

Global news

BV movers . . .

CPE events

LinkedIn discussions

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