BVWire Issue #175-1 | April 5, 2017


Handy forms help value undivided interests in real estate

It is essential when valuing an undivided interest in real estate to do a partition analysis based on local law, advises Ted Israel (Israel Frey Group LLP), who conducted a recent BVR webinar. Whether the case is contested or uncontested, ignoring the possibility of a partition by sale as a path to liquidity is a serious gaffe, he warns. “You have to allow that the IRS will offer its own partition analysis, and it may be based on assumptions inconsistent with your own. Therefore, the analyst needs to prepare his or her own well-reasoned and supportable partition analysis.”

Two practice aids: Israel made available to webinar attendees an interview form designed to help gather information regarding the costs and duration of a partition action. Each state has its own laws governing partition, so you need to research the area where the property is located. You can use this form to guide your questions when you find an attorney with knowledge and experience with partition actions in the subject’s locality.

Israel also provided an information request form for collecting financial data on the property and to ask for a narrative of the property’s history. He has generously agreed to make these two documents available to BVWire readers as a complimentary download.

And there’s more: You’ll receive a slew of other reading material, including related court cases and articles, if you watch a replay of Israel’s webinar, Valuing Undivided Interests in Real Estate.

back to top

Missouri embraces Daubert standard

About a month after Florida turned its back on Daubert, Missouri governor Eric Greitens signed a house bill that adopted the Daubert standard as applicable to expert witnesses. Until this development, the admissibility of expert witness testimony in Missouri was guided by statute. The Missouri Code of State Regulations §490.065.3 required that the facts or data upon which an expert based an opinion "must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reasonably reliable."

Missouri was one of several states that followed neither the Frye standard nor the Daubert standard. North Dakota, Nevada, and Virginia are others.

Those favoring the adoption of Daubert included industry groups and the state’s Chamber of Commerce, as well as the Missouri Society of Certified Public Accountants. The proponents argued that the new standard would improve the reliability of expert witness testimony. Daubert was the “best practice standard” in that it required a judge to serve as gatekeeper to the admission of “sound science,” they said. Opponents contended that judges were able to keep “junk science” out of the courtroom under the existing standard. Following the Daubert standard would only make lawsuits more costly and longer for the parties, they claimed.

According to the Missouri Times, in his State of the State address in January, the governor had said adopting the Daubert standard was one of several major tort reform measures he wanted to accomplish.

Extra: Readers who would like to see the bill can find it here. Also, check out Daubert v. Frye – A State-by-State Comparison, but be aware that it still shows Missouri in limbo.    

back to top 

CEIV quality control requirement raises client confidentiality concerns

Attendees at the AICPA’s three-day prep class for the new Certified in Entity and Intangibles (CEIV) fair value credential raised an issue of serious concern to some: confidentiality of client information.

Here’s the story: All CEIV credential holders will have to submit a fair value engagement work file for a quality control review within 12 months after getting the credential. Some attendees had trouble with the notion of handing over a work file that contains confidential client information. Under the CEIV quality control process, the work file (selected by the practitioner) goes to the VPO that issued the credential (i.e., the AICPA, ASA or RICS), which would use staffers or volunteers for the review. Each VPO will handle its own quality control process. 

“We would have a real problem sending out a work file,” said one attendee, an in-house CPA who oversees purchase price allocations for acquisitions his company makes. “We’d love to have all of our people get this credential but this will give us pause.” Others felt their clients would be agreeable to this and pointed out that work files are already subject to outside inspection by, for example, the PCAOB.

Issue will be addressed: AICPA officials at the class assured attendees that the information in the work files will be kept confidential. The submission process will be a redactive one, so any confidential information can be deleted. The quality control process is still evolving, and confidentiality will be a major issue addressed, they say. Another attendee asked what should be put into an engagement letter that addresses this matter. The AICPA says it will come out with guidance along these lines, such as model language. Presumably, the other VPOs will do the same.

The CEIV prep class was conducted in New York City March 22-24 by Mark Zyla (Aquitas) and Mark O. Smith (AICPA). Zyla is the author of Fair Value Measurement: Practical Guidance and Implementation; Smith was a technical author on the Mandatory Performance Framework, a set of best practices CEIV holders must follow.For more information on the credential, there’s a special CEIV website that’s been set up.

Extra: In last week’s BVWire, we noted that the AICPA lets you take the CEIV exam before you have the required 3,000 hours of fair value experience. If you pass, you can hold yourself out as a “CEIV Candidate” until you actually receive the credential. We must point out that this is the policy of the AICPA and may or may not be the policy of the ASA or RICS.

back to top 

BV outsourcing to India stirs strong feelings

“No way.” “It’s not allowed per the standards.” “We already use domestic outside sources.” These are some of the comments BVWire received concerning coverage of India’s outsourcing services to the BV profession. India offers data collection, industry and economic research, competitive and comparable analysis, and financial modeling and valuation report reviews, among other services. The reported savings average about 50% of the cost of a valuation performed domestically on a long-term basis.

It is interesting to note that at the last AICPA conference, a valuation report that was showcased during a two-day case study analysis included an industry analysis section provided by a respected outside domestic source. During the session, neither the panel nor anyone in the audience questioned this practice. Based on the comments we’ve received, it seems some experts are okay with farming out industry or economic research, but only to well-known and reputable providers here in the U.S. Many are uncomfortable with the notion of offshoring any of the work, although it evidently is being done. But complex valuation calculations are off-limits no matter what, some say. That type of work, they feel, should be done in-house, especially if it’s for litigation.

What do you think? You can comment via email or go to BVR’s LinkedIn Group where you’ll find a discussion thread on this topic.

back to top 

Reminder: Comment on contingent consideration exposure draft

The deadline for comments is April 28 on the Valuations in Financial Reporting (VFR) exposure draft Valuation of Contingent Consideration. Issued by The Appraisal Foundation, it contains detailed discussions of the typical structures of contingent consideration, key valuation issues, valuation techniques deemed to represent best practice, methods for assessing the reasonableness of contingent consideration fair value estimates, and issues at subsequent measurement dates.

back to top 

Pre-order D&P’s U.S. Industry Cost of Capital

The Duff & Phelps 2017 Valuation Handbook – U.S. Industry Cost of Capital is now available for pre-order (available June). This resource contains the same type of industry-level analysis previously published in the green-cover Morningstar/Ibbotson Cost of Capital Yearbook, now discontinued. This edition provides up to eight cost of equity capital and weighted average cost of capital (WACC) estimates for each of the U.S. industries covered in the book, plus capital structure, valuation (trading) multiples, sales, market capitalization, capital structure, several levered and unlevered beta estimates (e.g., ordinary-least squares (OLS) beta, sum beta, downside beta, etc.), financial and profitability ratios, equity returns, aggregate forward-looking earnings-per-share (EPS) growth rates, and more. The data in this edition is through March.

back to top 

Global BV News

RICS’s Ben Elder comments on global valuation profession

A “polarization in client requirements” is one of the trends in valuation seen by Ben Elder, the global director for valuation at the Royal Institution of Chartered Surveyors (RICS). Interviewed by Nick Talbot of the IVSC, Elder says some clients “just want the number produced at the least cost; others are demanding greater input from the valuer about what the numbers mean, particularly going forward in time.”  

Elder is the chair of the new IVSC Tangible Assets Board, one of several new boards that just went operational. Asked about the key challenges he faces relating to valuation, he says:Change … change driven by technology and big data. The skill set of many valuers around the globe is being challenged as new sources of information become available. How we convert information into knowledge is critical to the profession.”

You can read the full interview on the IVSC website.

Extra: The new IVSC boards met for the first time last month in New Jersey. We hear that there will be a staff consultation paper issued very shortly.

back to top 

iiBV debuts IVS 2017 course

On March 31, The International Institute of Business Valuers (iiBV) launched its first educational course in international business valuation standards. The course was a live in-class event that was hosted by the Canadian Institute of Chartered Business Valuators (CICBV) in Toronto. The course will be available online as a self-study course through the iiBV, Business Valuation Resources (BVR), iiBV members, and the IVSC starting later this month. Course materials will consist of presentation slides, participant manual, a case study, the IVS 2017 book, and a 25-question multiple-choice exam. Successful participants will receive an iiBV certificate of completion.

The International Valuation Standards 2017 (IVS 2017) are available now in print or PDF format. The standards act as guidance for the valuation profession globally and as a good resource for both U.S. and non-U.S. appraisers.  

back to top

BV movers

People: Scott Baret was appointed vice chairman and leader of the banking and securities practice in Deloitte’s New York City office … Brian Becker was appointed national consulting leader of RSM. He’ll also serve as a member of the firm’s national leadership team … Robert Charlton, partner at Nisivoccia in Mount Arlington, N.J., was awarded the 2017 Volunteer Award by the Sussex County Chamber of Commerce … P. Scott Ozanus was elected chairman of the Americas Region of KPMGChase Wright is a new Assurance and Advisory partner at Cherry Bekaert’s Tampa Bay practice.

Firms: Axens Audit of Andrezieux, France, joined the Europe, Middle East, and Africa region of PrimeGlobal … Carmel, Ind.-based Blue & Co.’s Cincinnati office was named a 2017 Emerging Business Leader by Lead Cincinnati magazine … Crowe Horwath has merged in cybersecurity company SDGblue, based in Lexington, Ky … Moore Colson was named one of Atlanta’s “2017 Top Workplaces” by the Atlanta Journal-Constitution for the seventh consecutive year … Sikich has acquired Evolution Retirement Services, based in Wauwatosa, Wis. Evolution’s employees will join Sikich’s Brookfield, Wis., office … Milwaukee-based Wipfli was honored by the University of Wisconsin-Green Bay with its inaugural Weyenberg Prize for Business Excellence, recognizing a company’s distinction in leadership transformation, strategy, and execution.

Please send your professional and firm news to us at

back to top

CPE events

NEW DATE: Monte Carlo 101: Start Modeling in Excel (April 11), with John Elmore (Willamette Management Associates).

Regression Analysis: Fundamentals for Appraisers (April 20), with G. William Kennedy (Duff & Phelps).

CEIV: Ready, Set, Go! (April 25), with William A. Johnston (Empire Valuation Consultants).

Advanced Bankruptcy Valuation (April 27), with Robert Reilly (Willamette Management Associates).

Important note to webinar attendees: To ensure that you receive your dial-in instructions to BVR’s training events, please make sure to whitelist

back to top

New and Trending LinkedIn Discussions

Outsourcing and the Legal Profession

Hitting the Bullseye

Feedback Wanted on a Streamlined Version of MUM for Estimating Personal Goodwill 
Your discussion could be featured here—BVR's LinkedIn group is a place for valuation professionals to share, discuss, and learn about compelling BV topics. If you're not already a member, request to join:

back to top

We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden (Executive Legal Editor) at:
Share on LinkedIn


Not a BVWire subscriber?
Get on the list today.

In this issue:

Partition analysis

Missouri goes Daubert

CEIV concern


TAF exposure draft

Industry cost of capital

Global BV news

BV movers . . .

CPE events

LinkedIn discussions


Copyright © 2017. All rights reserved.

Business Valuation Resources, LLC

1000 SW Broadway, Suite 1200
Portland, OR 97205
P: 1-503-291-7963