BVR Logo July 8, 2020 | Issue #214-1

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

Calculations of value are admissible in divorce, Alabama appeals court confirms

About two years ago, in Rohling v. Rohling, an Alabama appeals court upheld a trial court’s decision to admit into evidence a qualified expert’s estimate about the value of the owner spouse’s business based on a calculation engagement. Recently, the admissibility of calculations of value became an issue in another divorce case, presenting the appeals court with an opportunity to overturn Rohling. The court declined.

Whether calculations of value have any role to play in business valuation, and particularly in the litigation context, has been a contentious topic among appraisers (as BVWire readers know), and courts have not been uniform in their positions. In Alabama, however, the issue seems now settled.

Weight, not admissibility: In the instant case, the flashpoint was the value of the wife’s medical practice. The trial court awarded the wife sole ownership of the practice and the husband $550,000 in alimony in gross. The trial court did not make a specific finding of value. But, based on the alimony amount, the wife assumed the trial court used the value estimate of the husband’s expert.

This expert, an experienced CPA and valuator, used a calculation of value, which, she explained, was different from an opinion of value. She said her approach eliminated some calculations that she did not believe were appropriate in this case and (as reported in the appeals court opinion) said “that a calculation of value requires less speculation than does an opinion of value.”

The wife at various points in the proceeding objected that a calculation of value was not as thorough as an opinion of value and was not admissible under the state’s Rule of Evidence 702, governing admissibility of expert testimony.

The trial court found the expert qualified and the testimony admissible. It said any objections to the methodology went toward weight and the expert’s credibility. The husband’s expert proposed a value of $2.5 million for the practice. In contrast, the wife’s expert, also an experienced CPA and valuator, provided an opinion of value that put the value of the practice at $241,000. He explained the additional factors and calculations that were involved in preparing the more thorough opinion of value.

In challenging the trial court’s divorce judgment with the state Court of Civil Appeals, the wife claimed the trial court had erred in admitting into evidence the testimony of the husband’s expert. The expert used an unreliable methodology that produced an estimate that was speculation and, therefore, was inadmissible. The wife said an opinion of value, as prepared by her expert, was “much more exacting” than the opposing expert’s calculation of value. The wife asked the appeals court to overrule Rohling v. Rohling.

The reviewing court rejected the request and declined to “make a determination as to which methodology is best in valuing assets in the context of a divorce action.” As it did in Rohling, the appeals court said it would not substitute its judgment as to the weight to be given to an expert’s testimony for that of the trial court. The trial court’s judgment stood.

A digest of Horne-Ballard v. Ballard, 2020 Ala. Civ. App. LEXIS 50 (May 1, 2020), and the court’s opinion, will be available soon at BVLaw. A digest of Rohling v. Rohling, 266 So. 3d 51 (Ala. Civ. App. 2018), as well as the court’s opinion, are available now to BVLaw subscribers.

Extra: The Horne-Ballard case is one of the court decisions Jim Alerding and BVR’s legal editor will discuss in the upcoming July 22 BVLaw Case Update. Register for the webinar here.

COVID-19 takeaways from NACVA’s Virtual Super Conference

In the last issue, we gave you some takeaways from the NACVA and the CTI’s 2020 Business Valuation and Financial Litigation Super Conference that was held online over five full days (June 15 to June 19). Of course, COVID-19 was a hot topic of discussion in a number of the sessions, so, in this issue, we present a few tips from the conference on dealing with the pandemic’s impact on business valuation.

  • Jim Hitchner (Valuation Products and Services) was “shocked” by the CBO’s June 1 report saying that, as a result of the global pandemic, it will take 10 years before the country’s real gross domestic product (GDP) matches the office’s projections from January.
  • Even with adjustments to cash flows for the extra risks of COVID-19, projections will still have less reliability than before, says Roger Grabowski (Duff & Phelps). Therefore, the discount rate will have to reflect some of the extra risks.
  • You don’t have to stick with a five-year DCF. Consider a two- or three-year time frame as well as multiple scenarios and a mix of discount rates, advise several speakers.
  • Not all companies are being negatively impacted by the pandemic, points out Mark Kucik (The Kucik Valuation Group LLC). But be careful and don’t assume that a spike in business will last—dig into what is really going on.
  • As it did in the wake of the 2008 crisis, the IRS is on the lookout for pumped-up DLOMs without adequate support and explanation, reports former IRS manager Michael Gregory (Michael Gregory Consulting LLC).
  • Clients are worried about survival and are less in need of full-blown valuation services, so consider offering help in that regard, such as zero-based budgeting and debt renegotiation, advises veteran practitioner Rod Burkert (Burkert Valuation Advisors LLC), who focuses on helping valuation firms with practice management.
  • Although COVID-19 is grabbing all the headlines, it’s not the only major development that will have potential impacts on valuation, says Chris Hamilton (Arxis Financial Inc.). These include the Fed buying up corporate bonds, the upcoming elections, and low interest rates.

For more, see “25 Tips on Dealing With COVID-19 From the NACVA Conference” in the upcoming August 2020 issue of Business Valuation Update.

Take our economics trivia quiz

In today’s environment, an understanding of the economy is more crucial than ever in valuations. Subscribers to BVR’s Economic Outlook Update (EOU) have a good handle on what’s going on, so, for you nonsubscribers, how about taking a short quiz to test your economic IQ? For those of you who earn a passing grade, BVR will offer a 30% discount on a new EOU subscription. To take the quiz, click here.

EOU is published monthly and quarterly and contains expansive research from leading authoritative resources that you can use in your valuation reports (as long as you give proper attribution). For a sample issue (May 2020), click here.

Company-specific risk webinar gets help from BVResearch Pro

During a recent webinar, it was noted that there are various models for estimating company-specific risk, such as Trugman, Black/Green, Warren Miller, and Butler/Pinkerton. Then there was a mention of the Finison-Dailey model. “What model?” “Never heard of it.” Those comments started to reverberate from the audience, so, right then and there, a search of the BVResearch Pro platform was done. Result: An article popped up from the July 2003 issue of Business Valuation Update written by—guess who—Finison and Dailey.

Their model is based on a SWOT analysis and uses a five-point scale to quantify the company-specific equity risk premium. The strength/weakness scale ranges from -2 for “critical weakness” to +2 representing “core competence.” The opportunity/threat scale ranges from -2 for “very threatening” to +2 for “very opportunistic.” While the model provides a formula to pinpoint the company-specific equity risk premium, the analyst should still use professional judgment in determining the appropriate analysis area and ratings. The formula is:

Pcs = C - (∑ (SW%,OT%) × (Rmax - Rmin)/4)


Pcs = company-specific risk premium;

C = center point of premium range, determined by averaging Rmax and Rmin;

SW% = the percentage score of strengths and weaknesses;

OT% = the percentage score of opportunities and threats;

Rmax = the maximum possible premium in the range; and

Rmin = the minimum possible premium in the range.

The article, “A SWOT Model for Quantifying the Company-Specific Risk Premium,” written by E. Bryant Finison Jr. and Michael L. Dailey, is available to subscribers of Business Valuation Update or BVResearch Pro (or it can be purchased as a stand-alone article).

New international president for ASA

Lorrie Beaumont, ASA, RA, Certified Residential Appraiser, owner of Westwood, Mass.-based LB Appraisal Associates Inc., began her one-year term as international president for the American Society of Appraisers on July 1. She has been appraising since 1980 and established her practice in 1988.

Extra: The 2020 ASA International Conference will be completely virtual October 12-13. All appraisal disciplines will be covered, and the full agenda is available.

IVSC interviews EFRAG leaders

Issues that overlap the valuation and financial reporting disciplines were discussed during an interview with leaders of the European Financial Reporting Advisory Group (EFRAG). EFRAG is a private not-for-profit association established in 2001, with the backing of the European Commission, to develop and promote European views that inform the standard-setting work of the International Accounting Standards Board (IASB). The interview was conducted by the International Valuation Standards Council (IVSC), which works closely with EFRAG on a range of issues. Topics discussed include the global standard-setting process, internally generated intangible assets, improving the goodwill impairment framework, reporting of nonfinancial risk, ESG, and other matters. Participating in the interview are Saskia Slomp (EFRAG CEO), Chiara Del Prete (chair of the EFRAG Technical Expert Group), and Rasmus Sommer (senior technical manager). To read the full interview, click here.

BV movers . . .

People: Mark P. Barnett Jr., CPA, CVA, CGMA, CCIFP, MBA, takes on the role of partner and construction team leader at Great Bend, Kan.-based Adams Brown Beran & Ball Chtd., which has acquired the Jonesboro, Ark., branch of EGP PLLC, which included Barnett and six individuals … Nelson Luis, CFE, CFI, has joined New York City-based EisnerAmper as a principal in its forensic, litigation, and valuations services group; he will also lead the forensics practice in the firm’s Philadelphia office … Carlos Ferreira has been named national managing partner of private equity services for Chicago-based Grant Thornton; he will assume the role effective August 1, taking over for the retiring Doug Gawrych.

Firms: Anders CPAs + Advisors of St. Louis has added crosstown firm Cummings Ristau & Associates, adding two partners and 19 staff members; Cummings Ristau has strong expertise in the banking industry in Missouri and Illinois … Brooklyn, N.Y.-based Roth & Co. LLP has acquired E.C. Ortiz & Co. LLP of Chicago, effective July 1, which will expand the firm’s reach to the Midwest and broaden its service capabilities to include government entities … Miami-based Kaufman Rossin now offers a multidisciplinary suite of services designed to help clients with the financial and operational challenges posed by the economic impact of COVID-19; services include cash and liquidity management consulting, restructuring/turnaround advisory, business continuity services, help with business interruption claims, and other services.

Please send your professional and firm news to us at

CPE events

An attorney and valuation expert examine key issues—some controversial—with ESOP transactions and valuation in the face of ongoing threats of litigation.

Corporate bonds are much too large and marketable to be used as a proxy to value most small privately held promissory notes (up to $10 million). This webinar presents a new technique and real-world examples to illustrate.

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


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