BVWire Issue #159-1 | December 2, 2015


IRS changes its tune on minority discounts?

Long-awaited proposed regulations under section 2704(b) to limit the ability of family-owned businesses to apply minority discounts under certain circumstances may not be as impactful as previously expected, according to several sources.

Easing up? The IRS appears to be reversing itself on this matter, according to a posting on LinkedIn. The posting is from Richard Dees, a partner at McDermott Will & Emery LLP, who had sent a 29-page letter to the government critiquing the proposal as beyond the scope of its powers. The posting cites a BNA news item that quoted an IRS official. Also, a blog post from the S Corp Association cites the same BNA news item.

The chair of the AICPA FVS executive committee, Carol Carden (PYA PC), tells BVWire: “The IRS officials working on the section 2704(b) regulations recently said to the AICPA Trust, Estate, and Gift Tax Technical Resource Panel that they are still working on the regulations, and the regulations will rely on the statute, and not follow the Treasury’s green book proposals.” Does this mean that the regulations may not have as big of an impact as was thought—or maybe no impact at all? “I think we really won’t know the answer to that question until the regulations are released,” says Carden. “But as of now, it does not appear to be as impactful as we first thought.”

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Takeaways from the AICPA’s IP litigation panel

Patent litigation underwent a downturn in 2014, but there’s been an uptick in 2015. That’s one message from a panel on IP litigation at the recent AICPA FVS Conference in Las Vegas. The panel included damages experts Glenn S. Newman (Baker Tilly Virchow Krause LLP), who served as moderator, Jeffrey M. Buchakjian, Joseph W. Lesovitz (both with EisnerAmper LLP), and an intellectual property lawyer, Steve G. Schortgen (K&L Gates). They offered other valuable observations.

Georgia-Pacific: Experts are divided over the continued importance of Georgia-Pacific: Some worry that a failure to discuss the factors in a reasonable royalty analysis spells exclusion of their testimony. Others say it’s become less important over time. What is clear is that experts only have to discuss the factors relevant to their case.

Particularized analysis: Of course, experts must know the legal principles, but, most important, they must tie the law to the facts of the case. Time and again, courts find the link is missing and discredit a damages analysis.

EMVR: The entire market value rule (EMVR), which comes into play in a lost profits and reasonable royalty calculation, is an exception to the rule that an expert must apportion damages according to the value the patented feature contributes to a product that also contains nonpatented features. EMVR allows basing damages on the entire value of a product only if “the patent-related feature is the basis for customer demand.”

Courts interpreting EMVR have created confusion as to damages proof. Plaintiffs’ experts don’t know how deep to go in their analysis to show “customer demand.” The calculation gets increasingly more complicated because high-tech devices contain so many components besides the patented feature. Better to ask yourself: What value does the protected feature add to what component of the accused device?

Royalty base: Select your royalty base carefully to reflect only the value the patented feature adds to the infringing product, the panel cautions. Do not count on being able to adjust an improperly high royalty base by lowering the royalty rate.

Rules of thumb and surveys: Courts generally frown on the use of rules of thumb, including the Nash bargaining solution, in part because experts don’t explain a particular rule’s applicability to the facts of the case. Courts also tend to be skeptical about the use of surveys to support damages claims because of the potential for biased questions.

Litigation costs: Clients today are scrupulous about litigation costs, the lawyer on the panel says. Therefore, it’s tempting for the attorney on the case to rein in costs whenever possible. But limiting an expert to a tight budget may be penny-wise and pound-foolish. The last thing the attorney wants is to hear the expert testify he or she would have done a more thorough damages calculation but for budget constraints.

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FASB developments to note

Several recent developments from the Financial Accounting Standards Board (FASB) are of interest to valuation professionals:

Definition of ‘business’: The FASB issued a proposed Accounting Standards Update, Clarifying the Definition of a Business, intended to explain the definition of a business to assist organizations evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance in the proposed ASU would provide a more robust framework for determining when a set of assets and activities is a business.

Deferred taxes on the balance sheet: The FASB issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, intended to improve how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent.

Update to PCC procedures: The Financial Accounting Foundation (FAF) released a report outlining revisions to the operating procedures of the Private Company Council (PCC) that are intended to improve the group’s effectiveness without significantly changing the PCC’s roles and responsibilities. Some of the decisions made by the FAF trustees include maintaining the ability of the PCC to propose private-company alternatives and that the PCC should increase effectiveness of its advisory role by, for example, regularly communicating with the FASB on projects for which the PCC is advising.

For more information on these and other FASB developments, see the latest edition of FASB Outlook, a quarterly publication.

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Global BV news:

BV education launched in Saudi Arabia

The Saudi Authority for Accredited Valuers (TAQEEM) has partnered with the International Institute of Business Valuers (IIBV) to launch an education program. The program was announced at the recent TAQEEM conference, The Reality and Future of Business Valuation in KSA, in Riyadh. Soltan Aljorais, vice president of TAQEEM, and the IIBV’s Michael Badham jointly presented an overview of the accreditation program that will begin with offering BV 200 and BV 201 (based on the IIBV’s 100 and 101 courses). The first courses will be offered in Riyadh and Jeddah during the first two weeks of December. The IIBV will work with TAQEEM to train Arabic-speaking trainers and begin to translate the courses into Arabic.

For more information on the program, click here. The IIBV is also actively seeking member organizations that share a common vision of developing quality BV education. For more information, go to the IIBV website or contact IIBV executive director Michael Badham.

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New resources from BVR

Business Valuation Resources has released two new special reports and a customized report service from ktMINE:

Accounting firms: This is the first in a new series of What It’s Worth guides that will focus on the valuation of specific industries and types of firms. What It's Worth: Accounting Firm Value is designed for both appraisers and firm owners. It provides the latest advice, firm value drivers, and data analysis in setting forth the latest benchmarks for valuing an accounting firm.

Veterinary practices: A unique type of business, veterinary practices can present a valuation challenge. What It’s Worth: Veterinary Practice Value provides the latest information on what drives value as well as a solid understanding of the techniques that will yield a defensible value.

Company IP research: You can now get a customized report on a specific company’s current portfolio of intellectual property (IP), its IP investments, and its recent activity, thanks to a new service, ktMINE Reports. These special custom reports expose a company’s innovation strategy and will save you time and money in research. To check out a sample report, click here.

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Tribute to a BV colleague

A very special event took place just prior to the AICPA FVS conference in Las Vegas: the Ragnar Relay. This 200-mile overnight relay race was run in honor of Bob Duffy, a friend, colleague, and mentor to many in the BV profession. Bob was diagnosed with ALS (Lou Gehrig’s disease) in 2010 and is now dedicating his time to fight this incurable disease. The race was part of a fundraising campaign Bob and his family and friends are conducting for Answer ALS, a nonprofit that helps patients and families living with ALS to lead more productive and purposeful lives.

Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC) and his team, The Thighs That Bind, ran the relay and dedicated it to Bob and his efforts, which so far have raised over $85,000 toward their goal of $100,000. This is also with the assistance of Bob’s long-time friend and business partner Neil Beaton (Alvarez & Marsal) and Bob’s wife, Karen. Many of you have already donated, and Bob, Karen, and Neil greatly appreciate it.

To help Bob help others, you can make an online donation if you click here. If you do not want to make an online donation but want to support this amazing effort, you can email Stacey Udell (Gold Gerstein Group LLC) and arrange for a donation. Thank you in advance for your generous support!

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Doctor-turned-appraiser Stanley Pollock passes away

Dr. Stanley Pollock, an oral surgeon who became a well-known appraiser, passed away recently. He was president of Professional Practice Planners (Pittsburgh). Stanley Pollack was a board-certified oral and maxillofacial surgeon and earned Bachelor of Science (B.S.), Master of Science (M.S.), Doctor of Philosophy (Ph.D.), and Juris Doctor degrees. He was a Master Certified Business Appraiser (MCBA), a Master Certified Machinery and Equipment Appraiser (MCMEA), a Certified Valuation Analyst (CVA), Accredited in Business Appraisal Review (ABAR), and a Certified Financial Analyst (CFA). He wrote over 100 publications, including BVR’s Guide to Valuing Dental Practices. His contributions to Pratt’s Stats earned him a Hall of Fame designation. BVR extends its condolences to the Pollock family.

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BV movers . . .

People: Richard Bartolo joined the capital markets advisors practice of the Berkeley Research Group in Atlanta … J. Andrew Koecher joined Houlihan Lokey as managing director and head of transaction advisory services, based in the Dallas office … Steven Kuzma and Joseph Galanti have joined Grant Thornton’s forensic and valuation services practice as managing director and principal, respectively; both are based in the firm’s Atlanta office … Travis Pittman has been appointed markets leader for transaction advisory services at Houlihan Lokey; he will coordinate cross-border deals and head up client development at the Dallas office.

Firms: AN Valuation Services, a business and IP valuation firm in the Netherlands, joined the MG Valuation Alliance, a group that assists accounting and consulting firms by providing real estate, machinery, and business valuation throughout the Americas, Europe, and Asia … Brown, Edwards & Co., a regional CPA firm with headquarters in Virginia, merged with Dent K. Burk Associates and Hodges, Jones & Mabry, adding automobile dealerships and restaurants to its specialized services lines … EisnerAmper merged with Mallah Furman of South Florida, a firm that specializes in insurance, hospitality, professional services, construction/real estate, retail, and telecom … EisnerAmper also merged Ueltzen & Co. of California into its forensic, litigation and valuation services group … Ernst & Young has merged with NorthPoint Digital, a digital services company based in New York City that designs, builds, and implements technology for websites, apps, and portals … Katz Sapper & Miller, headquartered in Indianapolis, announced its merger with the 65-year-old firm Krouse Kern & Co., based in Fort Wayne, on December 1 … Marcum announced two mergers as of December 1: with the Philadelphia firm Smart, Devine & Co. and with DGLF CPAs & Business Advisors of Nashville, Tenn., and Orlando, Fla. … MarksNelson of Kansas City, Mo., acquired Marsh & Co., a firm based in Overland Park, Kan., that specializes in tax credit consulting and auditing services to real estate professionals, developers, and historic preservationists in the region … Porte Brown of Chicago merged in Alliant Advisors, an Illinois firm that provides financial, strategic, and business operations expertise … The Chicago firms Prism Healthcare Partners and Principle Valuation announced the intent to merge as of January 2016 and to combine Prism's performance improvement efforts with Principle's valuation and advisory services.

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Connect with top BV experts via new CPE series

An entertaining and valuable way to earn CPE credits is with BVR’s newest webinar series, Expert Insights, which premiers December 16. Join host Jim Alerding (Alerding Consulting LLC) for a series of one-hour, in-depth interview sessions with well-known practitioners and thought leaders in the BV profession. The inaugural guest will be Ron Seigneur (Seigneur Gustafson LLP), who will offer practical insights and personal perspectives and will field any and all questions from the audience. Expert Insights is where you’ll learn everything the books don’t teach you! To register, click here. Bring your questions!

Special offer: If you are a subscriber to Business Valuation Update, you can attend this first event in the series at no charge.

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Encore of S Corp workshop in December CPE events

Valuing Brand Names (December 10), with Chris Mellen (Valuation Research Corp.) and PJ Patel (Valuation Research Corp.). This is Part 8 of BVR's 2015 Special Series on Intellectual Property.

Special Encore: By popular demand, the hottest topic of the year is back! BVR will replay its four-hour Advanced Workshop on Taxes and Value: Guidance on the S Corporation Valuation Puzzle (December 15), with Nancy Fannon (Meyers, Harrison & Pia) and Keith Sellers (University of Denver). There will be a live Q&A segment.

Valuation of Complex Financial Instruments in the Energy Sector (December 17), with Matthew Goldberg (BDO), Ernie de Lachica (BDO), and Pablo Alfaro (BDO).

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:

IRS U-turn

IP litigation

FASB doings

Global BV news

New BVR resources

Special tribute

In memoriam

BV movers

Meet the experts

CPE events












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