BVR Logo January 27, 2020 | Issue #220-4

BVWire is your go-to source for the latest in the business valuation profession. Highlights for this week include:

Attorney sees trouble with proposed new
BV glossary

If the new proposed glossary of business valuation terms makes its way into the valuation standards, practitioners will face more exposure to professional risk, says an attorney in a Letter to the Editor. The new proposed glossary is out in exposure draft form with a comment period ending January 31 (see our prior coverage for details).

To the BVWire editor:

I am a civil trial lawyer, and my practice for 45-plus years has included the representation of accounting professionals in addressing and defending malpractice claims and license issues. Accordingly, I noted with interest some proposed items, including a revised glossary of terms, related to business valuation services by accountants.
I need to say that I have concerns about creating a situation where the “standard of care” for a business valuation accountant might markedly shift by the creation of new terms, definitions, and processes that such professionals may not be using now; the legal standard refers to what the reasonably prudent accountant would, or would not, do in same or similar circumstances. Accordingly, I believe the proposed revised documents increase the potential for professional risk.

Further, the Florida Supreme Court ruled midyear 2019, effective at that point and going forward, that the Florida courts will shift to the Daubert methodology currently used in federal courts in evaluating the extent of expert testimony allowed in a given case. Florida had been a Frye jurisdiction on that standard, and Frye essentially focused on one question: whether the expert’s opinion is generally accepted by the relevant scientific community. The Daubert standard offers a list of factors to consider. Florida’s evidence code, within FS 90.702, in its current form, provides: A witness who is qualified by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert’s specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

I believe the risk that may arise in the proposed revisions to the glossary is it would become part of AICPA’s business valuation standard and implicitly make the valuation methods and technical terms generally accepted. And, in my experience with such experts, I am not convinced that many of them use these valuation methods and terms in the proposed revisions and may have difficulty in explaining them.


Michael J. Corso
Florida Bar Board Certified in both civil trial and business litigation law
Henderson, Franklin, Starnes & Holt P.A.
Fort Myers, FL

During a recent BVR webinar, a panel of business valuation thought leaders urged practitioners to submit comments on the proposed glossary by the January 31 deadline. You can find more details including how to submit comments in our prior coverage.

U.K. and U.S. courts differ on COVID-19 business interruption claims

A recent article in the New York Times reports that the U.K. Supreme Court recently ruled that insurers must cover COVID-19-related losses. This is a huge victory for small-business owners whose business interruptions claims often have been rejected by insurers. In contrast, many U.S. courts (state and federal) have sided with insurers and granted motions to dismiss the plaintiffs’ cases.

Legal test case: As in the U.S., many business owners in the U.K. discovered that insurers were reluctant to pay business interruption claims related to the pandemic. As the Times article explains, the many rejections caused Britain’s financial services regulator, the Financial Conduct Authority (FCA), to file a legal test case on behalf of policyholders in the country’s highest court. The goal, the FCA says, was “to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible.”

The test case sought to litigate key issues and obviate the need for individual policyholders to resolve their individual issues with their insurers. The FCA says for its test case it identified 370,000 policyholders with 700 types of policies that were issued by 60 insurers.

According to the Times article, the Supreme Court’s recent judgment (Jan. 15, 2021) says pandemic-related losses and losses flowing from governmental shutdown orders are covered under two key terms that appeared in many of the policies. They are the “disease clauses,” covering losses from any occurrence of a disease that must be reported to authorities, and “prevention of access clauses,” covering losses when public authorities block access to the business premises. Further, the court ruled that businesses would be able to make claims for partial closure of business or orders that were not legally binding but that encouraged businesses to close days ahead of an order becoming law.

The FCA says it will work with insurers to conclude as soon as possible processing of eligible claims. The goal was to provide businesses with interim payments wherever possible.

Two hurdles: Meanwhile, in the U.S., business owners filing suit against insurers that denied claims for business interruption losses, in many instances, have failed to get beyond the motion to dismiss stage. Diesel Barbershop is a case in point. Here, a number of barbershops operating in Texas challenged the insurance company’s rejection of their claims under policies that were essentially identical. The policies included two hurdles to coverage. One was that they required an accidental, direct physical loss to the property. The court agreed with the insurer that the businesses were not “tangibly ‘damaged’ per se.” The plaintiffs did not plead direct physical loss to their buildings, the court said.

Further, the court agreed with the insurer that, even if the plaintiffs had shown direct physical loss to their properties, they still would not prevail on their claims because of the virus exception contained in the policies.

A companion case is Turek Enterprises, which arose in the Eastern District of Michigan and had facts similar to those in Diesel as well as an almost identical business insurance policy from the same insurer. This case, too, was dismissed.

Digests of Diesel Barbershop, LLC v. State Farm Lloyds, 2020 U.S. Dist. LEXIS 147276; 2020 WL 4724305 (Aug. 13, 2020), and Turek Enterprises, Inc. v. State Farm Mutual Automobile Insurance Co., 2020 U.S. Dist. LEXIS 161198 (Sept. 3, 2020), as well as the courts’ opinions, are available at BVLaw.

Hitchner poll reveals COEC sources of choice

The January 2021 issue of Hardball With Hitchner includes the results of polls that reveal what sources valuation practitioners use for developing cost of equity capital (COEC) estimates. The results of the polls taken in 2020 show that the Duff & Phelps data are “widely used and accepted” and that the BVR Cost of Capital Professional has “gained usage,” Hitchner says (see below)

Analysts’ Usage Percentages of COEC Data Vendors

COEC Source 2/25/2020 1/21/2020
Duff & Phelps Navigator 84% 92%
BVResources COC Pro 24% 21%
Damadoran’s data 13% 12%
Pepperdine survey 8% 13%
Other or none of the above 13% 7%

(Source: Hardball With Hitchner, Issue 3, January 2021)

“Damodaran’s data” refers to the work of Professor Aswath Damodaran (New York University Stern School of Business), who publishes a huge amount of free data on his website. The Pepperdine survey refers the Private Capital Markets Project from Pepperdine University, an analysis based on an ongoing survey of expected rates of return of providers in the private capital market.

During a conference session in 2019, Hitchner used both the Navigator and Cost of Capital Professional platforms on a hypothetical company. The result was a cost of equity range from both platforms that was “not that much different,” he said. Full coverage of that session is in an article, “BVR and Duff & Phelps Cost of Capital Platforms Go Head-to-Head at VSCPA,” which appeared in the November 2019 issue of Business Valuation Update.

Hardball With Hitchner is a monthly publication written by James Hitchner (Valuation Products and Services). For subscription information, click here.

TAF seeks candidates for its board

The Appraisal Foundation (TAF) is looking for qualified candidates to fill four at-large seats on its board of trustees. The TAF’s board oversees the funding, work, and members of the Appraisal Standards Board and the Appraisal Practices Board. The board of trustees includes individuals from all appraisal disciplines, users of appraisal services, former appraiser regulators, academics, and business leaders. The board meets twice a year, and appointed members will serve three-year terms beginning Jan. 1, 2022. Completed applications for the board vacancies are due by March 8. The application form can be found if you click here.

Sneak preview of NACVA’s Mentor
Support Exchange

After two years in development, the Mentor Support Exchange (MSX) is scheduled to be launched in the first quarter of 2021, according to a statement from Parnell Black, CEO of the National Association of Certified Valuators and Analysts (NACVA). The MSX allows NACVA members to get answers from experts to any and all questions concerning business valuation, litigation/expert witness support, and financial forensics. The MSX is divided into six areas and ways members can get the support they need, ranging from one-on-one advice, quick Q&A, coaching for those new to the field, and full-fledged team support for large projects. The MSX is “the most comprehensive program for member-mentor support ever seen certainly in our profession, but likely in any profession,” says Parnell. To take a look at the MSX, click here.

Reminder: Comments due on AICPA’s proposed standard on financial instrument valuation

The AICPA’s Auditing Standards Board (ASB) has proposed a standard designed to provide practitioners with more guidance on auditing management’s estimates of the fair value of financial instruments, including on the use of pricing services. The proposed standard provides guidance:

  • When management has used the work of a specialist in making accounting estimates, as well as other proposed amendments to enhance guidance when evaluating the work of the management’s specialist;
  • On the use of pricing information from pricing services when evaluating management’s estimates related to the fair value of financial instruments; and
  • When using the work of an auditor’s specialist.

The Proposed Statement on Auditing Standards (SAS), Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained From External Information Sources, has a comment period that ends February 4. Please send comments to

‘Amazing’ rebound for valuations in India

Over the past six months, “we have been amazed that valuations for most industries (save some severe casualties of COVID, including tourism, hotels, and aviation) are back to pre-COVID levels,” says a study on cost of capital in India. The study, from RBSA Advisors, examines movements in cost of equity, cost of debt, and resultant cost of capital. The study provides insight into the Indian economy, risk parameters, capital budgeting and leverage, as well as resultant costs of factors of capital. RBSA Advisors is the India-based partner of Valuation Research Group, and the study can be downloaded if you click here.

BV movers . . .

People: Jason Buhlinger, CPA, CFE, CVA, formerly a principal in the transaction advisory and litigation support services practice, has been promoted to partner at Brown Smith Wallace (St. Louis); he will continue leading the firm’s business valuation, litigation support, and fraud investigation engagements … The National Association of Certified Valuators and Analysts (NACVA) has named its outstanding members for the fourth quarter 2020: Sarah Spelts Loebl, CVA, who is the founder and president of Valuation Analytics, a business valuation, forensic accounting, and litigation services firm serving clients nationwide and, particularly, in the Denver and Chicago metro areas; and Alan Zipp, CPA, JD, ABV, CVA, CBA, CFE, who has provided specialized tax and financial planning advice to individuals and small businesses since 1970, with a specialty in the area of divorce tax and financial planning and related litigation support services … Douglas A. Terry, CPA, ABV, has been promoted to senior manager at Bodine Perry, a public accounting firm with offices in Ohio and Florida; he oversees tax, accounting, and valuation engagements for a wide range of clients.

Firms: Baton Rouge, La.-based Postlethwaite & Netterville is adding The Koerber Co. of Hattiesburg, Miss., which focuses on valuation and litigation support … Cleveland-based CBIZ has acquired Borden Perlman Insurance Agency of Ewing, N.J., a property and casualty insurance agency providing liability and risk management to midmarket clients throughout the U.S. … Albuquerque, N.M.-based REDW LLC is adding CPA Global Tax & Accounting of Scottsdale, Ariz., a firm that focuses on tax planning, structuring, consulting, compliance, and transfer pricing issues, with a specialization in international tax and business issues … New York-based Prager Metis International expands into North Carolina by adding Blair Bohlé & Whitsitt PLLC of Charlotte, a firm that provides assurance, tax, and advisory services to individuals, businesses, and nonprofit and government organizations headquartered primarily in the greater Charlotte area and throughout the Carolinas … Houston-based Calvetti Ferguson has launched CF Financial to provide wealth management services to individuals and small businesses.

Please send your professional and firm news to us at

CPE events

The convertible securities market in the context of the current economic environment, along with practical demonstrations of the use of various models as they apply to convertible debt instrument valuation, is discussed This is part of BVR’s Special Series on Fair Value.

  • Business Valuation Ethics. February 3, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Scott Saltzman (Saltzman LLC).

Learn about how to avoid inadvertently violating the professional valuation standards. This webinar includes a discussion of the standards for appraisal reviews.

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


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