Date: Wednesday, July 25, 2018
10:00am-11:40am PT / 1:00pm-2:40pm ET
Format: A BVR Webinar

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Featuring  (click image for bio)

Mark J. Edwards
Grant Thornton, LLP

About This Program

What in business valuation does the Tax Cuts and Jobs Act impact? Everything—including fair value. Join Mark Edwards for a discussion on how NOL’s, goodwill and ASC 805 are all impacted by recent tax law changes. Understand the Base erosion anti-avoidance tax provisions and how expensing tangible property impacts your fair value assignments. Be confident in the changes you make for 2018 engagements with a thorough review of your income and market approaches.


  • Describe how goodwill is impacted by the TCJA
  • Describe the difference in NOL limitations pre and post TCJA
  • Define BEAT
  • Describe how ASC 805 is impacted by the TCJA

Learning Objectives


    • Federal corporate income tax rate reduction from 35 percent to 21 percent
    • Interest deductibility limitation
      • Limited to 30 percent of EBITDA (30 percent of EBIT in FY2023 and after)
      • Non-deductible interest may be carried forward over 5 years
    • Expensing tangible properties
      • Full deduction application to new or used tangible assets
      • Phased out over 5 years starting 1/1/2023
      • Acquired tangible assets can be fully expensed in 2018
    • NOL Limitations
      • NOLs occurred in FY2018 or before offset 100% of taxable income
      • NOLs occurred after FY2018 offset up to 80% of taxable income and can be carried forward indefinitely (no carry back allowed)
    • Base erosion anti-avoidance tax (“BEAT”)
      • Compares actual federal tax with a 10% tax on EBT excluding intercompany payments (interests, management fees, etc.)
      • Greater of federal tax and BEAT is applied


    • Tax rate illustration
      • Common range was 35-40%
      • Now observing 21-27%
    • Interest deduction
      • Show table to illustrate transition
      • Does it really matter?
        • High leverage companies are most at risk
        • Private equity
    • Depreciation
      • Not applicable to land, but used equipment is fair game
      • Implied sale
        • 2018 expense existing tangible assets
          • Excludes real property
        • Bonus depreciation on capex
        • Table on fade out post-2023
      • Minority basis
        • Ensure your assumptions align to management’s intent
        • Bonus depreciation
    • NOL limitation
      • Table of 100% offset in 2018 and 80% after
      • Impact is the reduce the value of NOL balance
    • BEAT
      • Fairly rare application
      • Look for complex corporate structures

    Impact on Goodwill

    • Income approach
      • NOLs
        • Tax rate
        • Interest deduction
        • Amortization
        • Use limitation
      • Depreciation
        • Two forms of presentation
          • Addback Depreciation, Subtract Capex
          • No capex, no depreciation addback
        • How do you treat normalized capex/deprecation?
          • Most 5-year forecasts at this point end in 2022, last year of full bonus
          • Assume the delta is not significant
          • Forecast out capex and depreciation in totality (no cash flow impact shown in DCF)
          • Just capture delta between capex and depreciation beyond discrete period
      • Discount rate
        • Tax shield applied against cost of debt
        • Can we assume full use of tax shield?
        • Easiest to demonstrate how forecast interest compares to EBITDA/EBIT
        • If not, some net cash outflow may be reflected
    • Market approach
      • The approach provides far fewer inputs to directly reflect the impact of tax reform
      • Market is assumed to reflect benefits of tax reform
        • When did this occur?  No right answer
        • How do you differentiate frothy market from increases due to tax law change?  You can’t.
      • Make sure if you use an EBIT multiple that you reflect GAAP D&A

    Impact of ASC 805

    • Similar impacts to IRR as we discussed in the Income Approach for ASC 350
    • MPEEMs
      • Tax depreciation should be reflected in cash flows
      • Contributory charges
        • Need to reflect economic basis of fixed assets
        • Return of
          • Based on economic depreciation
        • Return on
          • Link through the economic depreciation for determining asset % of revenue
    • Deferred taxes
      • While we don’t pretend we understood all necessary changes to DTAs before, tax reform hasn’t made it easier
      • Communicate to our clients that what we’re presenting may further shift due to DTA/DTL changes


    • Non-U.S. owner of a U.S. company
    • Look for BEAT

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CPE Information

Prerequisites: Knowledge of Business Valuation
Program Level: Advanced
Preparation Required: None
Delivery Method: Group Internet-Based
Recommended CPE: 2 Credit Hours (Accounting Technical)

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