BVWire Issue #150-4 | March 25, 2015


Positive BV growth at most Top 100 accounting firms

About two-thirds of the Top 100 accounting firms report increased growth in their business valuation services, according to the 2015 Top 100 firms survey by Accounting Today (free registration required). BV is No. 6 in the rankings of the fastest-growing niche services.

Attest, M&A top list: The widest growth is reported in attest services and mergers and acquisitions, which hold the top two spots on the list, respectively. The jump in attest work can be attributed to the growing number of companies providing outsourced control-based services. A hot transactional market and the wave of baby boomers retiring and looking for exit strategies fueled the growth in M&A services.

Rounding out the top 10 are state and local taxes, industry specializations, international tax, litigation support, nonprofit organizations, estate/trust/gift tax planning, and forensics/fraud.

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There’s a double dip misconception, says appraiser

Last week’s BVWire reported on the Bohme divorce case, in which the Ohio Court of Appeals rejected the double dipping analysis. The article prompted the following comment from business appraiser Rob Levis (Levis Consulting).

“The double dip misconception in our profession is a thorn in my side,” says Levis. “It really is not complicated: if future expected cash flow represents a return on capital (i.e., value of business interest), it is not a double dip. But when the cash flow is a return of investment there is a double dip.” He continues: “Think income-generating real estate. How can anyone argue that net rental income on an appreciating real estate asset is not income available for spousal maintenance?”

In Bohme, the Court of Appeals observed that the double dipping framework was most appropriate when dealing with “fixed assets that produce an income stream such as a pension or annuity.” Levis agrees up to a point. He notes, however, that the court’s position fails to appreciate some important nuances. “A pension or annuity income stream is a combination of return on capital and return of capital. Once in payout status, there is more return on and less return of early on when the annuitant’s life expectancy is at its longest/highest. As the annuitant’s expected remaining life diminishes over time, the return on capital decreases and the return of capital increases.”

He adds that, in the case of businesses, the underlying assumption is usually an income stream into perpetuity. "All of the income is usually a return on capital, and therefore no return of the investment. It is not a depreciating asset like a pension. It really is similar to real estate in that respect, but for some reason I never hear anyone discuss that analogy,” he says.

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IP auctions add to sources of transaction data

BVWire braved New York City’s Spring Blizzard last week to attend the AICPA Fair Value Measurements Workshop conducted by Mark Zyla (Acuitas Inc.). It was well worth it! In discussing best practices in the valuation of intangible assets, Zyla talked about the relief from royalty method and potential sources of information. He mentioned an interesting source: Ocean Tomo, an investment bank that holds private and public auctions of patents. It plans to hold live auctions four times in 2015 starting this spring.

Zyla also mentioned traditional sources of data, such as IP databases ktMINE, Royalty Source, and Consor. SEC filings and court cases can also be good sources, he says.

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Calculating the value of public domain photographs

The value of public domain photographs is worth about a quarter of a billion dollars a year to Wikipedia, according to a new research paper. The authors studied the biographical Wikipedia pages of authors, composers, and lyricists to determine whether the public domain status of available images leads to cost savings and increased visitors to individual pages.

“We find that the large majority of photos and illustrations used on subject pages were obtained from the public domain, and we estimate their value in terms of costs saved to Wikipedia page builders and in terms of increased traffic corresponding to the inclusion of an image,” the paper says. The authors estimate a total value of public domain photographs on Wikipedia of $246 million to $270 million dollars per year.

The paper, The Valuation of Unprotected Works: A Case Study of Public Domain Photographs on Wikipedia, is by Paul J. Heald (University of Illinois College of Law), Kris Erickson, and Martin Kretschmer (both University of Glasgow).

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When in Rome: Data sources used by valuation analysts in Italy

In a recent interview in the upcoming May issue of Business Valuation Update, Ascanio Salvidio (Salvidio & Partners) describes the valuation profession in Italy and the importance of a convergence of valuation standards in his country. He also talks about the data sources he uses.

“There is extensive information (financial data, transactions, ownership, etc.) for both public and closely held Italian companies available through the national Company Registrar (Registro delle Imprese),” says Salvidio. “However, search capabilities are limited and there are almost no screening tools. Therefore, every professional valuer in Italy must also rely on other, more sophisticated, sources.” He mentions Standard & Poor’s Capital IQ, Alacra, the databases of Thomson Reuters or Bloomberg for financial data of public companies, and Bureau van Dijk for transaction data. He also uses financial newspapers and periodicals, most of which are available online.

“The Internet is an enormous source of information for valuers,” says Salvidio. “I recently was involved as counsel in a litigation concerning the value of a wedding planner firm that had not filed financial statements for a few years. I was able to do a rough estimate of its revenues because all of the events it organized had been proudly put on its public Facebook page.”

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IFRS 2015 ‘Red Book’ now available

The International Accounting Standards Board and the IFRS Foundation released the 2015 International Financial Reporting Standards, also known as the “Red Book.” The new, two-volume edition includes the official consolidated text of IASB pronouncements as of Jan. 1, 2015, and all IFRS with an effective date after Jan. 1, 2015 (but not the standards that they will replace). The Red Book is available in PDF format or a “bundled” print and PDF edition; for more information, check out the IFRS Foundation web shop.

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AICPA’s SSVS No. 1 now codified in professional standards

The AICPA’s Statement on Standards for Valuation Services No. 1 (SSVS1) has been officially incorporated into the codification of the AICPA Professional Standards and is now VS Section 100. “Actually this is important that for CPAs it is now clearly part of the body of the professional standards of the AICPA and on equal footing with all other professional standards of the AICPA,” says David H. Goodman (Gosule, Butkus, & Jesson LLP) in a LinkedIn post. In a video statement, Carl Steffen, current co-chair of NACVA's Standards Committee, explains the codification and recommends to members that any reference in engagement letters to specific provisions of these valuation services standards should include applicable paragraph numbers from the new VS Section 100.

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Preview of the April issue of Business Valuation Update

Here’s what you’ll see:

  • New Book Is Major Advance in Thinking About S Corp Taxes and Value (BVR Editor). Research shows that shareholder-level taxes affect a firm’s value, which refutes the position of the IRS and Tax Court, according to authors Nancy Fannon (Meyers, Harrison and Pia LLC) and Keith Sellers (University of Denver).
  • Think Like a Potential Investor to Do an Exit Plan Valuation (Z. Christopher Mercer, ASA, CFA, ABAR). How to help advise business owners to transition out of their firms at the highest possible value.
  • Employee Stock Options: What Valuation Analysts Should Know (Yingping Huang, Brett King, Keith Sellers, CPA/ABV, CVA, Ph.D.). An analysis of specific attributes of ESOs that complicate the valuation process.
  • Rules of Thumb and Prior Transactions of Company Stock (Heidi Walker, ASA, CPA, ABV). An example of applying valuation rules of thumb using industry data from the Business Reference Guide.
  • Alternative Methods of Purchase Price Determination in Buy-Sell Agreements (Brian Burns, CPA/ABV/CFF, ASA, Chris Mitchell, CPA/ABV/CFF). An examination of how to determine purchase price, which includes a new survey of attorneys and how they draft these provisions.
  • 20 Ideas to Help Make Your IRS Dealings Go Smoother (Michael Gregory, ASA, CVA). Former IRS manager in valuation area gives some time-tested ideas that valuation practitioners are using in the field.

To read these articles—as well as digests of the latest court cases—see the April issue of Business Valuation Update (subscription required).

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BV movers . . .

People: David Buckley, former CIA inspector general, joins KPMG as a managing director and will lead its Forensic Advisory Services … Dave Camp, former U.S. House of Representatives Ways and Means Committee chairman, joins PwC US as a senior policy advisor based in its Washington, D.C., practice … Shea Dean has been promoted to manager at the Alabama firm Hartmann, Blackmon & Kilgore P.C. (hb&k), one of the Gulf Coast's leading CPA and business consulting firms … Robert Mancini joins Dixon Hughes Goodman as a director in Risk Advisory Services and will be based out of its Washington, D.C., office … Sandy McGee joins the Wisconsin firm of Vrakas/Blum S.C. as chief operating officer … Mandeep Trived is the new practice leader of valuation services at Citrin Cooperman in New York City and will direct preparation and delivery of valuations of private equity, businesses, intellectual property and intangible assets, and complex securities.

Firms: Grant Thornton has been named “Best Program for Leadership Development” by the Managing Partners’ Forum at its 2015 awards celebration in London … Boston-based Walsh, Jastrem & Browne LLP (WJ+B) merged with the national firm WithumSmith+Brown.

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Get your CPE before the busy season heats up

We’ve got several upcoming webinars of interest:

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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We welcome your feedback and comments. Contact the editor, Andy Dzamba at: or (503) 291-7963 ext. 133
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In this issue:

BV practice growth

Double dip delusion

IP transactions

Public domain pix

Data in Italy

New Red Book

SSVS No. 1 codified

April BVU preview

BV movers

CPE events








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