BVWire Issue #190-3 | July 25, 2018

 

Amid outcry, AICPA will improve decision process re: credential matters

In a response to harsh criticism, the AICPA has acknowledged that it could have handled the decision process better regarding the change in eligibility for the ABV credential. This past May, the AICPA Council voted to open the ABV credential to non-CPAs. After the vote, a number of prominent CPA/ABVs signed an Open Letter to the AICPA that criticized the decision and said that the AICPA did not properly consult with members and stakeholders prior to the change.

Future fix: During an AICPA webcast, the organization—to its credit—said that it “could have done better” in communicating the proposed change and would improve the decision-making process in the future. The AICPA has been exploring opening up other credentials for specialty services (CFF, CITP, and PFS) to non-CPAs (“other qualified professionals,” or OQPs). Also, critics had attacked a timeline of events leading up to the change, saying that it was inaccurate. The AICPA has since revised the timeline and apologized for any confusion it may have caused.

The speakers on the webcast were Eva Simpson (the AICPA’s director of valuation services), Thomas E. Hilton (Anders), Annette Stalker (Stalker Forensics), and Bethany Hearn (CliftonLarsonAllen LLP). The speakers explained the reasons and benefits of the change, saying that expanding eligibility for the ABV credential “helps to promote consistency, quality and transparency in the valuation marketplace.” Also, they said that CPA-led firms are looking for a single organization that can provide appropriate training, credentialing, and ongoing support for all their employees, including both CPAs and finance professionals. You can listen to an archive recording of the webcast if you click here (registration required).

Rebuttal: In a statement to BVWire, some of the signers of the Open Letter say that, since the AICPA has acknowledged that the process was flawed, it should suspend the decision to admit non-CPAs as ABVs, solicit input from members, and bring the matter before the Council again. “What is the harm?” they say. They also took issue with the remark during the webcast that members should look beyond the “passionate” response and support the move going forward. “If AICPA doesn’t acknowledge any legitimate concerns from knowledgeable people and simply attributes reactions to passion, they are out of touch with their members,” the statement says. You can read the full text of the statement if you click here.

A survey some of the members who signed the Open Letter conducted found that 94% of respondents say they disagree with the decision to open up the ABV credential (see prior coverage). The speakers discussed the survey and felt that it was not representative because it was conducted prior to the July 16 webcast, which explained the reasons for the change and hopefully addressed the concerns of the critics. The speakers also noted that the survey did not accept responses from individuals who wished to remain anonymous, which may have inhibited participation. In a statement to BVWire, the individuals who conducted the survey say respondents were required to provide their names to prevent duplicate responses, which would have manipulated the results. “To do otherwise would have been unwise and unethical,” they said.

What do you think? There’s a discussion on the BVR LinkedIn page that has some reactions to the webcast. Please join in!

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Supreme Court allows recovery for lost foreign profits

In a much-anticipated patent infringement ruling, the U.S. Supreme Court recently expanded the scope of damages under certain circumstances. The issue was whether the patent holder, which had proven a domestic act of infringement, was entitled to lost profits related to the use of components of a patented device outside the United States.

WesternGeco LLC developed and patented technology used in geological surveys to search for oil and gas under the ocean floor. The company never sold its technology or licensed its patents. Instead, it performed surveys directly for oil companies. It had no competitors. In 2007, ION began shipping components to surveying companies abroad, which those companies combined into a surveying system that violated WesternGeco’s patents. In 2009, WesternGeco sued, claiming it lost survey contracts to ION’s foreign customers and also was forced to lower its prices to compete with the latter.

A jury awarded WesternGeco $12.5 million in reasonable royalty and $93.4 million in lost profits. On appeal, a majority of the Federal Circuit found liability but struck the lost profits award, finding, under the applicable law, WesternGeco could not recover for lost foreign profits. WesternGeco petitioned the Supreme Court for review.

The case implicated Sections 271(f)(1) and (f)(2) of the Patent Act as well as the presumption against extraterritoriality. Section 271(f) addresses the exporting of components of a patented invention. The extraterritoriality presumption states that U.S. laws apply only within the territorial jurisdiction of the United States. Patent owners proving infringement under § 271 are entitled to relief under § 284 of the Patent Act’s general damages provision, which provides for “damages adequate to compensate for the infringement” and no less than a reasonable royalty.

In a very technical opinion by Justice Clarence Thomas, the Supreme Court said the focus of § 284 is “the infringement.” To determine the focus in a given case, it is necessary to identify the type of infringement that occurred. The focus of § 284 in a case arising under § 271(f)(2) was the act of exporting components from the U.S., not the overseas use, said the court. In the instant case, the conduct relevant to “that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents,” the court said.

The Supreme Court dismissed ION’s argument that the focus of the statute was “self-evidently on the award of damages.” According to the high court, “the damages themselves are merely the means by which the statute achieves its end of remedying infringements.” Further, the overseas events that gave rise to the lost profit damages were “merely incidental to the infringement,” the court found.

The Supreme Court reversed the Federal Circuit’s decision and remanded.

A copy of the Supreme Court’s opinion in WesternGeco LLC v. ION Geophysial Corp., 585 U.S. ___ (June 22, 2018), and further analysis, is available at scotusblog.

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Insights into the valuation of cryptocurrency

A big crowd was treated to a fascinating presentation on cryptocurrency by Arik Van Zandt and John Sawyer, who are both with Alvarez & Marsal’s Seattle office. Here are a few takeaways:

  • There are thousands of different virtual currency mechanisms, known as “tokens”;
  • Initial coin offering tokens are very different than equity securities issued by start-ups;
  • Tokens are traded on exchanges throughout the world, which can be volatile and subject to manipulation due to lack of regulatory oversight; and
  • To value cryptocurrency, look to a relevant exchange and one that has a good amount of trading volume.

Half of the audience had no knowledge of cryptocurrency, and only one in 10 had ever valued it, according to a poll taken during the presentation. A recording of the presentation, Cryptocurrency – Price versus Value, will be available soon.

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Paper suggests key to improving fair value audits

Auditor experience—not guidance from regulators—will lead to higher audit quality of fair value measurements, according to a new paper, “Auditor Fair Value Expertise.” Researchers examined fair value-related restatements and comment letters to see what can be done about PCAOB inspections that repeatedly uncover deficiencies in audits of fair value estimates. The paper’s authors are professors/assistant professors at Northeastern University and Bentley University.

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New DealStats platform getting final touches

BVR is putting the finishing touches on DealStats, which merges Pratt’s Stats and Public Stats transactions into one powerful platform with state-of-the-art search capabilities, additional data fields, easier saving and report generation, and much more. Set to launch at the end of July, current subscribers to Pratt’s Stats will automatically get access to DealStats. On August 9, plan to attend a free one-hour webinar that introduces DealStats. You can register for this webinar if you click here. In the meantime, you can download Q&As from participants at the last DealStats webinar.

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Jam-packed agenda for ASA’s Advanced BV Conference

Valuation experts rely on empirical data, so here’s some for you: three days, 84 sessions, 98 speakers, two general sessions, five special networking events—plus you’re within walking distance of Disneyland! This is what you’ll find at the Joint ASA 2018 Advanced Business Valuation and International Appraisers Conference being held in Anaheim, Calif., on October 7-10. The agenda, which also details preconference education sessions, including prep classes for accreditation, is now available. You can register if you click here. Can’t attend in person? You can register for live streaming.

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Market research for the cannabis industry

Business appraisers who are valuing firms in the cannabis industry have a new resource for market research: The State of Legal Marijuana Markets, which is published by ArcView. There’s a discount for BVR customers, so, if you use the discount code “BVR100,” you will receive a $100 discount.

Extra: On August 7, there will be a webinar, Cannabis Industry and Valuation Update, conducted by the co-authors of the book The Cannabis Industry Appraisal and Accounting Guide.

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Global BV News

Comment period opens for proposed revisions to IVS 2017

The consultation process for proposed revisions to IVS 2017 is now open, and you can download a copy of the consultation document if you click here. The International Valuation Standards Council (IVSC) is committed to a fully open and collaborative consultation process and all comments received will be published (unattributed) on the IVSC website. The deadline for comments is October 16, and you should email comments to aaronsohn@ivsc.org, File Reference IVS 2017 Proposed Revisions.

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Dates set for 2019 international valuation conference in New Zealand

Business and machinery valuers will come together Sept. 8-11, 2019, in New Zealand for next year’s international valuation conference. The International Conference on the Valuation of Plant, Machinery and Equipment (ICVMPE), which began more than 20 years ago as primarily a plant and machinery event, has gradually evolved into a unique meeting place for the world’s leading business valuation and plant and machinery experts. Agenda and registration details will be forthcoming. Are you interested in presenting at this conference? Contact conference organizer Richard Berkemeier at richardberkemeier@gmail.com. The conference is supported by IVSC, ASA, China Appraisal Society, and many other national and international valuation organizations. Business Valuation Review and MTS Journal are the conference media partners.

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BV movers . . .

People: Zain Ahmed has joined Dixon Hughes Goodman as a principal in the DHG Forensics and Valuation Services practice … C. Zachary Meyers, who is in private practice, and Kent D. Pummel (Clark, Schaefer, Hackett & Co.) have been named outstanding members (second quarter 2018) by the National Association of Certified Valuators and Analysts (NACVA) Grant Thornton LLP has named David Platt as regional managing partner of the firm’s Northeast region, effective August 1 … Cleveland-based Skoda Minotti has admitted Jonathan Shoop as partner; he leads the firm’s manufacturing and distribution group.

Firms: Ankura Consulting Group LLC will acquire Navigant’s Disputes, Forensics and Legal Technology (DFLT) segment and its Transaction Advisory Services (TAS) practice; the transaction is valued at $470 million and is expected to close during the third quarter … Marcum Search LLC, the executive recruiting and temporary staffing affiliate of New York City accounting and advisory firm Marcum LLP, launched a new division dedicated to executive compensation services for businesses and nonprofit organizations; industry veteran Bruce Overton, who joins the firm as VP, will lead the division … Tobias Vandeputte & Skulsky PC of Troy, Mich., has merged its practice with Gordon Advisors PC also of Troy, effective July 1; the combined firm is operating under the name of Gordon Advisors Encino, Calif.-based Martini Iosue & Akpovi has changed its name to Martini Akpovi Partners (MAP), effective July 2018 … Bell & Company PA, headquartered in North Little Rock, Ark., has joined CPAmerica International, an accounting association of independent CPA firms … Mueller Prost increased its California footprint with a move to newly renovated space in Irvine; it expects continued growth in that office, as well as firmwide … CLA (CliftonLarsonAllen LLP) added Darton Group Consulting of Charlotte, N.C., which has 60-plus team members, on July 1.

Please send your professional and firm news to us at editor@bvresources.com.

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CPE events

  • Urgent Care Valuation: Key Considerations in M&A and Joint Ventures (July 31), with Christian Heuer (LBMC) and Doug Shirley (LBMC). This is part of BVR’s Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

    Get an update on the healthcare industry’s urgent care landscape, which continues to evolve at a rapid pace.

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New and Trending
LinkedIn Discussions

ABV Webcast

AICPA Says Non-CPAs Can Be Eligible for the ABV

BV Experts Clash Over Statistics

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:

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We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden, Esq. (Executive Legal Editor) at: info@bvresources.com.
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In this issue:

AICPA fix

Lost foreign profits

Cryptocurrency

FV audits

DealStats debut

ASA Anaheim

Cannabis resource

Global news

BV movers . . .

CPE events

LinkedIn discussions

 

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