The Appraisal Foundation seeks candidates

Do you have the desire to serve on one of The Appraisal Foundation’s (TAF) national boards, or know someone who does?  If so, TAF is currently conducting its annual search for qualified candidates to serve on the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB). 

TAF is interested in expanding the diversity of its boards by considering applications from business leaders with an interest in valuation or who are involved in various appraisal disciplines, such as business valuation or personal property.

There are up to three vacancies on the AQB and up to four vacancies on the ASB.  Individuals selected for these positions will serve a term of up to three years commencing January 1, 2009.

If you’re up for the challenge, application packages for these positions are now available at TAF’s website or click here to view.  For more information or to request an application package via email, contact Anne Raley.  Completed applications for these vacancies must be received by August 1, 2008.

IRS releases proposed Tax Return Preparer Penalties

On June 17, 2008, the IRS released a proposed Tax Return Preparer Penalties notice that discusses the procedures for filing claims for credit or refund for penalties assessed against tax return preparers under sections 6694 or 6695.  It is also covers the new appraiser penalty under section 6695A.

The notice proposes:

• the amount of penalties assessed against the individual and the firm shall not exceed 50 percent of the income derived (or to be derived) by the firm from the relevant engagement(s) relating to the position(s) giving rise to an understatement
• to meet the “reasonable basis” standard, a tax return preparer may rely in good faith, without verification, upon information furnished by a taxpayer, advisor, another tax return preparer, or other party
• the de minimis exception applies if the item giving rise to the understatement is (i) less than $10,000, or (ii) less than $400,000 if the item is also less than 20 percent of the taxpayer’s gross income (or, for an individual, the individual’s adjusted gross income).

A public hearing has been scheduled for Monday, August 18, 2008, at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.  Send your comments on the proposal to: CC:PA:LPD:PR (REG-129243-07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044 or electronically here.

Reasonable Compensation – learn from the best

“Determinations of what constitutes reasonable compensation are always a challenge for business valuation professionals where normalization adjustments are required to the subject economic benefit stream being used in conjunction with applicable income and market methodologies.  Reasonable compensation determinations have also become a larger focus for practitioners working with buy sell agreements, C and S corporation tax planning and in the context of practice management consulting opportunities to professional services firms,” declared Ron Seigneur, MBA, CVA, CPA/ABV (Seigneur Gustafson LLP in Lakewood, CO), moderator of BVR’s July 9th teleconference on Reasonable Compensation. 

Join Ron and his stellar panel of experts, including Sharyn Maggio CPA/ABV (Maggio & Company), Stacey Udell CPA/ABV, CVA (Gold Meltzer Plasky & Wise), and Jim Andersen CPA/ABV, ASA (Andersen & Company LLP).  You’ll learn what reasonable compensation is, factors that determine reasonable compensation, where you can find information about it and what’s included in the information, how reliable that information is and takeaways from a tax court case analysis.  As a special to BVWire readers, Ron has generously provided an article co-authored with Kevin Yeanoplos, CPA/ABV, ASA (Brueggeman and Johnson Yeanoplos, P.C. in Seattle, Washington) titled What is Reasonable Compensation?—get your copy here.  Join Ron and his panel of experts next week on Wednesday, July 9th at 10 am PT.  To register for the conference, click here.

A private equity leader attempts to blame the accountants for credit market crisis…

While overly-willing lenders and risky borrowers have received the majority of the blame for the credit market crisis, according to one of the top private equity leaders, the accountants are partially at fault.  In The New York Times article published in yesterday’s Business section titled Are Bean Counters to Blame?, Stephen A. Schwarzman, the co-founder of the Blackstone Group, believes that FAS 157 may be forcing the nation’s largest banks to overstate their financial problems.

According to Schwarzman, “the rule is accentuating and amplifying potential losses.  It’s a significant contributing factor.”  He thinks the reality of the current Wall Street situation is much brighter than the accounting measures suggest.  Hamilton E. James, the president of Blackstone, holds an even stronger opinion commenting on FAS 157—“it’s dangerous” because, in the case of collateralized debt obligations, which often contain subprime mortgages, the market is very scarce, if non-existent.  Without a market, a bank is forced to decrease the investment value, often down to zero, thus creating “misleading balance sheets.”

In BVWire’s experience, it’s never the auditors or business appraisers (or FASB rules) who “force” management to overstate assets, so we have a hard time buying this argument.   In fact, we venture to say that, without their involvement, those same mortgage assets would have been even more overstated than they already were, and the current crisis would be significantly worse than it is already.  

To read the entire article, click here.

Wrong Friday—right exclusive locale and experts

Last week’s BVWire included the wrong date for the exclusive The Uses and Abuses of Management Projections workshop with Neil Beaton and Jim Catty.  The correct date is Friday August 15.

Given the importance of—and debate around—working with management projections, BVR has collaborated with Neil Beaton and Jim Catty for an exclusive one-day workshop on Friday August 15 at the stunning Hyatt Regency on Lake Tahoe.  Registration is limited to the first 40 people, so bring the family and walk away with a solid framework for analyzing management projections.  For more information and to register, visit The Uses and Abuses of Management Projections web page.

Hedge Fund survey deadline extended!

Want to win an iPod Nano loaded with your choice of three BVR teleconference recordings?  In an effort to further develop thought leadership in the area of hedge fund valuation, we’d appreciate a few minutes of your time in answering a brief 15-question survey developed by Dr. Susan Mangiero, AIFA, AVA, CFA, FRM.

Whether you are already involved in hedge fund and derivative instrument valuation work or are interested in learning more about this important area, we’d love to get your input. Your responses will be used to better focus information to assist business valuation professionals who work (or want to work) with hedge funds. Click here to take the survey. (If you experience any difficulty, copy and paste this URL into your browser’s display line: http://www.zoomerang.com/Survey/?p=WEB227VRUND29S). The drawing for the iPod Nano winner will be held on July 11th and the winner will be announced in the July 15th issue of the BVWire.

‘Don’t send the numbers’

“Don’t send the numbers” was one of the suggestions from a participant at the True Confessions: Tales from the Trenches by Seasoned Experts presentation at NACVA’s conference last month in Las Vegas.  The presentation, which included many tales and resultant suggestions, was moderated by Michael Kaplan, CPA/ABV, CVA, CFFA (Kaplan, Abraham, Burkert & Company in Calabasas, CA), Rebekah Smith, CPA, CVA, CFFA (GBQ Consulting LLC in Columbus, OH) and Howard Zandman, CPA, CFFA (Tauber & Balser, PC, Atlanta).

Draft reports often prove troublesome for some experts and as a result, experts' drafts have given rise to some horrendous war stories which were the foundation for the True Confessions session.  The “don’t send the numbers” suggestion was in response to this hot discussion about the need to deal with the issues of drafts very carefully in order to avoid disasters.  Participants of the session chimed in with some practice tips for handling drafts, including:

• sending a report to the attorney without any numbers of conclusions simply to fact check
• or similarly, sending only selected sections for input on the facts or evidence
• discussing the report over the phone. 

In the end, there was no agreed upon solution; however, everyone agreed that if an expert creates a draft then he or she needs to keep that draft and more importantly, expect it to be discoverable. 

What are your thoughts on sending a draft of your expert report on a litigation matter to the attorney with whom you are working?  Take our survey and we’ll report on the results in an upcoming BVWire.

Other hot topics included:

• Deposition—when in deposition or at trial, don’t just answer “yes” or “no” to a question if not appropriate—if necessary, include verbiage to explain yourself so a complete statement is in the record. 
• Practice management topics on billing and collecting for deposition time—suggestions included not subjecting yourself to a deposition when the opposition is paying unless you are paid before or at the deposition, and a suggestion for billing deposition time, as offered by an attendee, was to bill a flat rate for every 4 hour segment, or portion thereof. 

‘You may be missing out’

That’s what Frank Evans ASA, CBA CPA/ABV (Evans and Associates, LLC in Sharon, PA) believes when it comes to opportunities that Appraisers' overlook. While teaching a workshop at the Institute of Business Appraisers' 2008 Symposium last week in Chicago, Evans said appraisers miss valuable consulting opportunities when we “merely work on a valuation engagement without getting to know the owner(s), finding out their goals, and helping them achieve those goals.”  Appraisers have a vast amount of business and financial knowledge upon which private company owners can capitalize.  “We can use this knowledge to help them build, protect and harvest owner wealth.”  The problem is that many appraisers stop after the value conclusion when they could also help with value management and enhancement.

By asking questions, the appraiser is selling themself and their knowledge. Many small, private company owners fail to think about and plan for the financial and non-financial goals associated with their business—this is where the appraiser’s knowledge can help. This type of consulting work accounted for 40% of Evans’ firm’s revenues last year—and could also open new doors for your practice.  Remember: listen and ask questions.