BVWire Issue #140-1 | May 7, 2014


Highlights of the ASA BV conference
in NYC

BVWire is just back from the 21st Annual Current Topics in Business Valuation conference presented by the New York City chapter of the ASA—a very fine event with excellent speakers. Here are a few key takeaways:

Fair value is on hold at the FASB, observes Adam Smith (FASB), due to concerns over the BV profession. Up to now, the FASB has been a proponent of fair value in financial statements. This trend will not continue, according to Smith, because of the fragmented nature of the profession and lack of a unified set of standards. Why should the FASB spend all this time on fair value if investors have no faith in the numbers?

DLOM toolkit now in beta testing, announced Jim Hitchner (Financial Valuation Advisors). The toolkit is designed to develop a supportable DLOM using existing research studies, databases, and models. But it’s “not a black box,” he says. You can drill down and see exactly how it all works. He developed it with Jim Alerding and Josh Angell.

Using an option model to value startups is the subject of a paper presented by John Finnerty (Alix Partners). His new model expresses the value of an emerging growth firm’s common stock as a call option on the firm’s assets struck at the cost of the future investment to make the product viable plus the cost of retiring the debt that’s needed. While the model could use some simplification, he demonstrated it with several real-life examples and urged users to “try it out and improve on it.” For a copy of his paper, click here.

The biggest problem with MPEEM valuations is the failure to take into account an inventory step-up, says Damien Hughes (PwC). Another common problem he sees is not using the appropriate margin when applying the “distributor method” for valuing customer relationships. And selecting the proper discount rate is “always a concern.”

More opportunities for fund valuations are on the horizon, says Craig Ter Boss (Eisner Amper). He says the ongoing scrutiny on fund valuations by the PCAOB and SEC will trigger increased use of third-party valuation experts by fund managers.

More on the conference in an upcoming issue of Business Valuation Update.

Our thanks to Scott Nammacher and Bill Johnston (both Empire Valuation Consultants), co-chairs of this excellent event. Plan to attend next year!

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Judge Laro favors radically different approach to expert testimony

Time to go “hot tubbing,” said U.S. Tax Court Judge David Laro to chuckles in the audience at a recent presentation. No, he doesn’t mean to go soak in a warm bath. He’s talking about a very different method of giving expert testimony that he favors over traditional cross-examination.

How it works: Hot tubbing, more formally known as “concurrent witness testimony,” is a technique practiced in numerous other countries. Judge Laro, who has used it in a few cases, says he sits at a table with the two experts flanking him and the attorneys relegated to the periphery. The judge opens a conversation, asks questions of the experts, and invites them to pursue their own dialogue. Without being attacked over their credibility, they are able to have a collegial discussion about their work on the case. He believes this technique can lead to a more equitable outcome.

Judge Laro, the author of the seminal Mandelbaum decision, made his remarks at a presentation “Valuation Issues From a U.S. Tax Court Perspective” sponsored by the Business Valuation Association. More coverage of his remarks will appear in the June edition of Business Valuation Update. Judge Laro’s Mandelbaum v. Commissioner, T.C. Memo 1995-255 (1995), is available at BVLaw.

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USPAP 2016-17 second exposure draft issued

If you recall, the Appraisal Standards Board put off making changes to the definition of “report” in the 2014-15 edition of USPAP (Uniform Standards for Professional Appraisal Practice). This was to allow enough time for consideration of this important topic. The time has arrived, and the ASB has included proposed changes in the just-released Second Exposure Draft for the 2016-17 edition of USPAP.

In addition to changes to the definition of “report,” there are proposed revisions to eliminate confusion regarding report drafts, revisions to Standard 3 to enhance consistency with other standards and to clarify the dates identified and reported, changes to eliminate confusion regarding confidentiality, and other edits to improve clarity and enforceability of USPAP.

Comments due: The ASB requests written comments by June 2, 2014. They can be sent to

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BV movers . . .

People: Gregory Cowhey joined McGladrey LLP as a principal in the Philadelphia office and will guide the firm’s financial advisory services for the Philadelphia and New Jersey markets … T.J. Haas joined Fesnak LLP as director of the firm’s Transaction Advisory Services group … James Gunn will be the new managing director of The International Federation of Accountants effective June 2014, when Jim Sylph retires Rebecca Lorenz will manage family law and forensic clients for Kaufman Rossin’s forensic, advisory, and valuation team in Fort Lauderdale, Fla. …Joseph Maas, a principal and investment advisor with Seattle-based Synergy Financial Management LLC, published his first book, Exit Insight: Getting to “Sold!” which gives advice to business owners thinking about retirement and reveals how they can boost the market value of their businesses … Peter Resnick was named managing partner of Grant Thornton LLP’s New England practice … Chris Rosenthal, a director at Ellin & Tucker’s Forensic and Valuation Services Group, was appointed to The Appraisal Foundation’s Business Valuation Resource Panel and Personal Property Resource Panel.

Firms: CohnReznick LLP has been ranked No.19 on the “2015 Vault Accounting 50,”’s listing of the best accounting employers to work for in North America … Fountainhead Advisors, an Atlanta-based provider of business valuation and related financial advisory services, recently celebrated 10 years in business—plus it was named by Acquisition International Magazine a winner of the 2013 Business Valuation Firm of the Year—Georgia … KPMG LLP was named the “Best Overall Consultancy” by Operational Risk & Regulation magazine …StarkSchenkein LLP is celebrating 20 years of service to the Greater Denver community.

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Timely BV topics in NYC May 19

Dealing with the IRS, DLOM update, detecting errors in transactional databases, and valuation issues in divorce are among the topics covered at the 16th Annual Business Valuation Conference in New York City on May 19, 2014. Hosted by the New York State Society of CPAs, this is the premier event for valuation and forensic professionals in the NYC area.

All-star cast: Speakers include two former IRS managers who specialized in business valuation and engineering issues on a national level, Michael Gregory (Michael Gregory Consulting LLC) and Howard A. Lewis (RiskGuidance Co. LLC). Other top-notch speakers are: Ashok Abbott (West Virginia University), Jaime d’Almeida (Duff & Phelps), Christine L. Baker (Meyers, Harrison & Pia), C. Fred Hall III (Affordable Business Valuations), and Fred D. Weinstein, Esq. (Kurzman, Eisenberg, Corbin & Lever LLP).

BVWire will be there, so we hope to see you! For details and to register, click here.

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Vets and meds highlight upcoming
CPE events

Healthcare entities—for humans and also our furry friends—are the subjects of two interesting webinars:

  • Valuing Veterinary Practices (May 8), featuring Byron Farquer and David McCormick (both Simmons & Associates). Everything you ever wanted to know about veterinary practice valuation from two presenters who know everything about veterinary practices.

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

ASA forum nuggets

Judge Laro's idea

USPAP changes

BV movers

NYSSCPA confab

New CPE events




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