Two weeks left to comment on FASB valuation standards

The deadline for responding to the Invitation to Comment (ITC) on the proposed Valuation Guidance for Financial Reporting by the Financial Accounting Standards Board (FASB) is fast approaching: Comments are due by April 15, 2007.   So far, the FASB has received only six responses, including a thorough overview by the International Valuation Standards Committee (IVSC) (see BVWire #54-2), which focuses more on the need for convergence:  

The IVSC supports the need for a set of valuation standards that are accompanied by sufficient interpretative and implementation guidance such that the standard is understandable, operational, and capable of being applied consistently in similar situations.   The IVSC does not support the need to set separate valuation standards for financial reporting (as distinct from any application guidance for a specific valuation purpose). The universal concepts, definitions and principles for valuation are the same, although there may be differences in their application and reporting.

By comparison, the remaining comments are rather terse.   “Any guidance would be extremely helpful,” says one practitioner.   Another submits:

I believe that separate valuation guidance specifically for financial reporting is not necessary. Some attempt should be made to work with valuation guidance that exists. If written, new guidance would likely make matters more complicated…From my perspective, the FASB is in a unique position to provide immense value to the market by working with existing valuation guidance, rather than creating its own.

ASA and others plan to respond

Expect more comments to the ITC to come from industry sources; for example, CUNA—Credit Union National Association, CFO Council has put out a call to members to submit internal comments by April 6th.   And the ASA (American Society of Appraisers) has just announced that its newly-revamped BV Standards Committee, led by Chris Mercer, met last week to discuss a response to the FASB ITC as well as its approach to recent changes in USPAP.

To read all of the current comments to the FASB’s Invitation to Comment on Valuation Standards, click here.   To review the project and submit a response by the April 15th deadline, click here.  

NASD Rule 2290 fallen into a ‘black hole’?

Remember Rule 2290, NASD’s (National Association of Securities Dealers) response to the growing concern that fairness opinions weren’t quite…fair?   Filed in its final form with the SEC in April 2006, Rule 2290 was intended to address any potential conflicts of interest when underwriters or other transaction participants (lenders, market makers, asset managers, etc.) also render an opinion on the deal’s financial fairness to shareholders.   The SEC received a smattering of comment letters, but nearly a year later, there has been no confirmation or update.  Contact with Treasury sources has led us to conclude that for now at least, Rule 2290 appears to have fallen into a bureaucratic black hole (bogged down by the heavyweight of investment banking firms, perhaps?)

The courts continue to show interest—evidenced by the recent ratification of the NYSE merger with Archipelago Holdings, Inc., in which the Judge lamented that fairness opinions have become “watered down and toothless.”    For BVR’s telephone conference on “Fairness Opinions,” featuring Shannon Pratt, Craig Jacobson (the senior analyst who led Willamette’s independent appraisal in the NYSE case) and Jeff Tarbell—in a CD or transcript, click here.

What’s the standard retainer for BV projects?  

If you answered 50% of anticipated project fees, you were right on the money: In response to last week’s online survey, the vast majority (91.3%) of respondents said they required up-front payments before the start of any valuation engagement.   Only 8.7% (or 4 out of a total of 46) respondents said they do not solicit retainers.

As to the breakdown of retainer amounts, a clear majority (59.5%) of online respondents receive 50% of project fees as a down payment.   The remainder spread their responses fairly evenly through the breakdowns, with about 7% receiving retainers in each of the amounts (25% to 100%) of project fees.

These results neatly coincide with the results in BVR’s just-published 2007 Business Valuation Firm Economics & Best Practices Survey , which found that just about the same majority of responding BV firms (60.5%) require half of the project fees as a standard retainer, while about a tenth require 25% or 33%.   To order your complete copy, click here.

Half of CPAs are women—but where are the women rainmakers?

The majority (60%) of accountants and auditors are women, according to a 2006 report by the Bureau of Labor Statistics and a recent article in the St. Louis Business Journal.   The AICPA also reports that half of its new members are women.

But at least one female CPA and firm principal asks, “Where are the women rainmakers?”   In her on-line article, Gale Crosley, CPA (Crosely+Company) identifies the cultural and professional biases—some held by women themselves—which may prevent their ascendancy to profit-making positions, including firm partnerships.   Crosley’s observations are easily adaptable to the BV environment; her identification of the ways partners can change the culture and structure of the workplace to encourage women rainmakers—and female analysts can hone their specific skills—makes worthwhile reading today.

Start planning your BV conference season now

It’s that time of year again: The business valuation conference season is already beginning to heat up, with bi-coastal meetings in May of the ASA’s New York and Los Angeles chapters (see BVWire #54-2).   That same month, state CPA societies of New York and Illinois are also sponsoring one-day BV seminars, the latter featuring such top-notch speakers as Nancy Fannon, Jim Hitchner, and Warren Miller.

This is all leading up to the national gatherings, of course, starting with:

  • NACVA’s (National Association of Certified Valuation Analysts) 14th Annual Consultants’ Conference in Washington, D.C. June 6-9;
  • IBA’s (Institute of Business Appraisers) 2007 Symposium in Denver, Colorado, June 20-23; and
  • ASA’s International Conference in Hollywood, California, July 15-18.  

Rounding out the season is the AICPA’s National Business Valuation Conference in New Orleans, December 2-4, 2007.

Think it’s too soon to start planning?   Sources at the IBA tell us that reserved rooms at the conference hotel “are going fast.”   And we know of at least one early-bird group of AICPA/BV leaders who’ve already booked a balcony room overlooking Bourbon Street.   To plan for all BV conferences, educational sessions and events, visit our comprehensive calendar at

The fair value of cornfields in Dela. appraisal law

The Delaware Chancery Court may be showing a preference for academic research by two University of Pennsylvania professors, Hamermesh and Wachter.   For example, at the most recent AICPA National BV conference, V. C. Donald Parsons mentioned that several of his fellow Vice Chancellors were off studying the professors’ paper on the Implicit Minority Discount at a seminar sponsored by UPenn’s Institute for Law and Economic Research (see BVWire #51-2).  

And then V.C. Strine, in his recent “landmark” Delaware Radiology opinion, noted the “thoughtful academic paper” by the same two authors on “The Fair Value of Cornfields in Delaware Appraisal Law,” which explains why fair value must include not only the present value of a firm’s existing assets—but also the future opportunities, known or knowable at the time, to reinvest free cash flow.   For a copy of the article, click here.

Top ten countries for global valuation strategists

If Russia can maintain its political stability and tap its immense resource wealth, then it may be among the top countries—along with China, Singapore, and India—poised to rule the global economy.   South Africa and Mexico are at crucial junctures in their development, while the U.S. needs to deal now with problems in foreign policy, fiscal deficits and cumulative current account deficits to maintain its position as the “strongest economy in the world.”

So says the author of How Countries Compete: Strategy, Structure, and Government in the Global Economy (HBS Press Book, March 13, 2007).   “I am trying to show that governments create the overall environment for successful competition in the global economy,” says author and Harvard Professor Richard Vietor. “Bad government can only lead to less competitive businesses.”   The new release is available at HBS Online.


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