December 20, 2006 | | Issue 51-3

Change of address

Please note our new address: Business Valuation Resources,LLC, 1000 S.W. Broadway, Suite 1200, Portland OR 97205. All other contact info remains the same, including feedback for BVWire™ at

Do we really need practice standards on fair value?

The FASB is planning to issue practice standards on fair value, according to Mark Zyla (Willamette Management Associates), who announced the initiative at last month’s AICPA national confab in Austin. “The Board will solicit input from all interested parties,” Zyla said, “about the need, if any, for additional valuation standards for [fair value] purposes.”

FASB director and project manager of its fair value initiatives, Linda MacDonald, confirms, “At this point, we are developing an Invitation to Comment (ITC) to solicit input from all interested parties on the need for valuation guidance to develop the measurements required for financial reporting and related issues, including who should develop/issue that guidance. We plan to issue the ITC this month (if possible). When we issue, the ITC will be available on the FASB website (”

In the meantime, don’t miss Zyla’s presentation with Neil Beaton (Grant Thornton), Ed Ketz (Penn State) and moderator Jay Fishman on “Valuing Intangibles,” BVR’s most recent telephone conference, providing key insights related to SFAS 141, 142R, 144, and 157. To obtain a transcript or CD, click here.

ABV Sponsor Program a ‘major disappointment’ to some

We received nearly a dozen responses to last week’s call for comments on the AICPA’s Sponsor Program—making it this year’s most hotly-debated topic in the ‘Wire. A representative comment:

This is a major disappointment…In effect, you are creating two classes of ABVs—those who have taken the test, and those who have not. I assure you that one of the questions that will come in deposition and/or cross-examination will be ‘did you actually take and pass the ABV exam or did you pick up your credential as part of the AICPA marketing plan to increase the number of ABVs’?

Likewise, “I think it is deplorable that the AICPA is running a ‘sale’ for a limited time on the ABV designation,” says a CPA/ABV. “The bar for becoming an ABV continues to be lowered and lowered.”

Are financial needs behind the current “membership drive"? Robert Harris, a managing director at Harris Cotherman Jones Price & Associates and Chair of the AICPAs National Accreditation Commission will address these specific concerns as well as any “misconceptions” about the program; we’ll feature his response in the first BVWire of 2007.

For more on the Sponsor Program, click here. To relay your confidential comments (which we will forward to Chairman Harris) email the BVWire editor.

CBA is ‘most respected’ credential, to others

Another BVWire respondent admits that he is “hedging his bets” by taking advantage of the AICPA Sponsor Program. Currently a CVA (Certified Valuation Analyst, from the National Association of Certified Valuation Analysts), this analyst doesn’t believe that the CVA and ABV will both coexist indefinitely. “NACVA has clearly anticipated the risk by creating credentials for non-CPAs and credentials related to other disciplines.”

Has the ABV been weakened by the current push to expand? “Hard to say…as passing a rigorous 8-hour exam does not guarantee good reports.” In fact, the CBA (Certified Business Appraiser, from the Institute of Business Appraisers) “is hardest because of the report requirement. You cannot write a report that will satisfy them unless you really know your stuff and how to express it.” The analyst’s long-term goal is to obtain the CBA credential: “I really respect it.”

For more on the Institute of Business Appraisers, which has just uploaded its 2007 education calendar, click here.

The latest from Michael Porter, on valuing social responsibility

It’s been nearly a decade since the release of Michael Porter’s Competitive Advantage: Creating and Sustaining Superior Performance (Free Press, 1998), which reviewers still hail as “the most influential management book of the past quarter century,” primarily for its pioneering “Value Chain” concept.

Currently a professor at Harvard Business School (HBS), leader of its Institute for Strategy and Competitiveness, author of 17 books and over 125 articles—Porter’s latest release is “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility [CSR]” Harvard Business Review (December 2006). Co-authored by Mark Kramer—who also co-founded with Porter the Foundation Strategy Group LLC (Boston), the article proposes an alternative to treating corporate growth and social welfare as a zero-sum game:

If corporations were to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices, they would discover, as Whole Foods Market, Toyota, and Volvo have done, that CSR can be much more than a cost, a constraint, or a charitable deed—it can be a potent source of innovation and competitive advantage.

In other words—CSR may yet prove to be the next decade’s most potent source of value. To purchase a copy of the article, click here.

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Kohler: The other side of the story

The Kohler case generated substantial discussion in BV circles (see BVWire #49-1), especially as many analysts considered the Tax Court’s ruling a “homerun” for the taxpayer—and a complete shutout for the IRS. But there are always two sides to such a complicated case—and the expert for the IRS (CBIZ Valuation Group, LLC) offers exclusive insights into the Kohler facts and findings in the January Business Valuation Update™ , including the Taxpayer’s reliance on “overly conservative” management forecasts and the allegedly redundant Dividend Discount model.

For a free copy of the article, click here. Note: We are also obtaining copies of reports by all Kohler experts, as well as both side’s trial briefs, the BVU case abstract, and more; watch for this exclusive valuation “bundle” to become available early next year.

BV firms slow to add owners/partners

Only one in eight firms responding to BVR’s forthcoming 2007 Business Valuation Firm Economics & Best Practices Survey has added a new principal (owner or partner) in the last 12 months, confirming the entrepreneurial nature of the field. Many in the BV profession start as sole practitioners—and intend to stay that way. To the question about making new partners, one respondent answered with a resounding “Never!!”, while another—desiring more emphasis, perhaps, replied “Never!!!”

But a hidden cost of such independence could be the current hiring shortage, as job candidates may sense that the “golden ring” of ownership remains elusive in the BV profession. Of greater concern is whether the “cobbler’s child has no shoes.” In other words, are BV firm leaders planning adequately for ownership transition?

To pre-order your copy of BVR’s full survey report, click here.

By 2011, healthcare will constitute 17% of GDP

That’s according to Cindy Collier (Cindy Collier & Associates), yet another excellent speaker at the recent AICPA national conference. The government is currently paying over 50% of the healthcare expenses in this country, she says—and by 2030, Medicare services will double. Not surprisingly, five of the top ten U.S. growing professions are currently in healthcare. But “as the market comes back, we may see a huge exodus of physicians.”

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