BVWire Issue #189-4 | June 27, 2018


Make your voice heard in the AICPA ABV controversy

Leading CPA/ABVs are asking that you give your opinion on the recent decision by the American Institute of Certified Public Accountants (AICPA) to allow non-CPAs to be eligible for the Accredited in Business Valuation (ABV) credential (see prior coverage). They have set up a short survey, and you can take it if you click here.

Reactions so far: “I am stunned.” “It’s a travesty.” “A terrible mistake.” The vast majority of the comments we received at this point agree with the signers of the Open Letter that criticizes the AICPA’s decision. And not all commenters are CPA/ABVs—some are CPAs with other business valuation credentials who are seriously concerned on behalf of all of their colleagues. However, some commenters feel that being a CPA may not always be the best prerequisite for being a competent business appraiser—that financial pros may have a better foundation than accounting/tax professionals.

A discussion on this matter has been set up on BVR’s LinkedIn page.

Extra: A serious matter in the Open Letter is that it states that the AICPA did not properly vet this issue with members, who—along with some ABV committee members—were surprised by the AICPA’s decision. Stay tuned for more on this.

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BV buzz at NACVA’s annual conference

BVWire was in Las Vegas last week at the annual conference of the National Association of Certified Valuators and Analysts (NACVA). Many excellent sessions covered topics such as impacts of the new tax law, cost of capital, lost profits/damages, expert witnessing, building your practice, and more. Here are just a few takeaways from some of the sessions:

  • If you have a valuation date between the dates President Trump was elected (Nov. 8, 2016) and when the new tax law was passed (Dec. 27, 2017), should you factor in “pre-enactment expectation” into your valuation? There’s no definite answer, but it’s something to think about.
  • Duff & Phelps says all of the backup material from the Valuation Handbook Guide to Cost of Capital is now viewable—and printable—in the Cost of Capital Navigator, which is replacing the hardcover version.
  • How can two highly qualified valuation experts come up with such different conclusions? Different legitimate assumptions, for one thing. We point out that another is inadvertently falling into an advocacy role if a client or attorney led the expert astray.
  • A case study illustrated the nightmare of an ambiguous buy-sell agreement—a good opportunity out there for valuators to help craft these and also do an annual valuation.
  • WACC is the most widely used discount rate for valuing a business, said one speaker, but not many in the audience said they use it.
  • The most important piece of advice when calculating the value of business interruption is to read the policy—including the fine print. What the policy says will dictate what you do from a valuation standpoint.
  • Valuing a cannabis firm? Examine the “four L’s”: license rights, lease, location, and legislative environment.
  • Don’t get blindsided by the opposing expert doing a forensic analysis and making large normalization adjustments—include forensics in your own analysis.
  • In some states, financial expert witnesses are required to turn over their personal financial information to determine whether or not they are a “professional witness”—check your state’s rules on this.

As for organizational news, NACVA unveiled a number of initiatives to enhance the profession and benefit its members. One is an arrangement with the Expert Witness Exchange, which matches up experts with attorneys. NACVA has also set up a program in which members can offer their services to attorneys doing pro bono work who are looking for an expert willing to do the same. In conjunction with this initiative, a mentoring program has been set up for fledgling valuation analysts who may need support with the pro bono work.

We’ll have more coverage in the next issue. Next year’s NACVA conference will be in Salt Lake City.

*This article has been revised to reflect Nov. 8, 2016 as the date of the election of President Trump.  

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BVLaw case update: buyout disputes

Even when the members of a business entity plan ahead for a potential buyout, a lot can still go wrong, often because the language in a controlling shareholder agreement leaves too much room for interpretation or a necessary corporate document is missing. The following cases illustrate some of the pitfalls:

  • Hornberger v. Dave Gutelius Excavating, Inc., 2017 Pa. Super. LEXIS 1044 (Dec. 15, 2017)

    The issue was discounts. The parties disagreed over whether the controlling shareholder agreement, which included provisions on how to value the shares of a terminated shareholder, allowed for the use of discounts. The agreement required the calculation of adjusted net book value by the company’s independent CPA and mandated three specific adjustments. The trial and appellate court found the appraiser was justified in applying discounts in addition to making the required adjustments, where such discounts are consistent with industry practice.
  • Lynd v. Marshall County Pediatrics, P.C., 2018 Ala. LEXIS 40 (April 27, 2018)

    The issue was the standard of value. A medical practice’s bylaws provided that the valuation should be in accordance with the method stated in the separate shareholder agreement. This method would be “in lieu of” the method provided for in the statute applicable at the time. But no shareholder agreement was ever made. Ultimately, the state high court found that, based on the bylaws, the trial court’s use of book value to value the separating member’s stock was error. However, the plaintiff failed to show she was entitled to a fair value determination as a matter of law.

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New BV standards charts reveal no conflicts

The different sets of U.S. business valuation standards do not conflict with each other, according to an updated tale-of-the-tape chart released by NACVA. It also released an international standards chart that compares the standards from the IVSC, RICS, and the CICBV that comes to the same conclusion.

The domestic chart compares the North American standards from NACVA, IBA, AICPA, ASA, and USPAP. The chart reveals that the standards have some subtle differences, but the principles are very close. The differences can be interpreted as being covered in one of the other standards but worded a little differently. Because of these nuances, practitioners still need to read and interpret what the different standards say about a particular aspect of practice in order to be in compliance.

Mark Hanson (Schenck SC), Mark Kucik (The Kucik Valuation Group LLC), Carl Steffen (WSRP LLC), and C. Zachary Meyers, who were part of the team that developed these charts (which took several years), were on hand at the recent NACVA conference in Las Vegas to explain the charts.

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New research refutes notion of private-company discounts

There is no evidence that unlisted firms sell at discounts compared to listed firms, according to a new paper. This goes against the routine assertion by academics, practitioners, courts, and regulators who generally believe the opposite is true. The researchers say their results “hold under a number of different approaches and after controlling for known determinants of acquisition pricing.”

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Agenda available for ASA Advanced BV Conference

One of the must-attend BV events of the year is the Joint ASA 2018 Advanced Business Valuation and International Appraisers Conference being held in Anaheim, Calif., on October 7-10. The agenda is now available and includes some preconference education sessions, such as a two-day workshop on attacking and defending an appraisal in litigation, a three-day prep class for the CEIV credential, and four-day BV201 and BV203 classes. Check out the full agenda, and you can register if you click here. Can’t attend in person? You can also register for live streaming.

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Free webinar on new DealStats platform

Attend a free one-hour webinar on July 11 that will showcase DealStats, a powerful new platform that combines Pratt’s Stats and Public Stats into one database with enhanced and vastly upgraded features. A July launch is set for DealStats, and, if you’re a current subscriber to Pratt’s Stats, you will automatically get access to DealStats. To sign up for the webinar, click here.

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New resource for valuation of cannabiz

The Cannabis Industry Accounting and Appraisal Guide is a new book from Canna Valuation, a firm devoted to the licensed and regulated cannabis industry. The book provides useful information for appraisers and accountants about the unique financial aspects and intricacies related to businesses operating in this area. The book’s authors are Ron Seigneur, Stacey Udell, and Brenda Clarke.

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Global BV News

New brand evaluation standard approved

The International Organization for Standardization (ISO) has unanimously approved a new global standard for brand evaluation, ISO 20671, that becomes effective in November.

The Marketing Accountability Standards Board (MASB) represented the U.S. in the development of the standard under the auspices of the American National Standards Institute (ANSI). Understanding that “brands are one of the most valuable yet least understood of assets,” the standard provides a framework for systematic, recurring brand reviews. Developed over several years by branding experts from numerous fields, it covers the entire process: from brand development to brand performance to brand valuation.

“Accountable marketers are going to love ISO 20671 because to be in compliance, they will have to value their brands regularly,” said MASB President/CEO Tony Pace. “That will be marketers’ ‘Golden Ticket’—not only to fund measurable brand value growth initiatives but also to measure the marketing contribution to enterprise value.”

This qualitative standard on brand evaluation supports ISO 10668, the international standard on quantitative brand valuation, adopted in 2010.

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BV in countries without developed markets

James Searby (FTI Consulting) has published an article in the Middle Eastern and African Arbitration Review 2018 on the issues arising during a business valuation in countries without developed financial markets.

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BV movers . . .

People: NACVA announced that the recipients of this year’s Thomas R. Porter Lifetime Achievement Award are Richard D. Thorsen and (posthumously) Robert James Cimasi, who was with Health Capital ConsultantsSareena Malik Sawhney has joined New York City-based Grassi & Co. as a principal in Grassi’s fraud, forensic and litigation support group based in its Manhattan offices … Ely Friedman has been named vice president of the mergers & acquisitions (M&A) advisory services group at Fort Wright, Ky.-based VonLehman & Co. Inc. … Chicago-based RSM US LLP announced that Chris Banse has been named as the firm’s national franchise leader … Jeremy Falendysz has joined Chicago-based UHY Advisors as a director in the firm’s Detroit office.

Firms: Southfield, Mich.-based Plante Moran will combine with Denver-based EKS&H effective October 1; the combined firm will be the 11th largest accounting, tax, consulting, and wealth management firm in the country, the firm says … BKD Wealth Advisors, a subsidiary of Springfield, Mo.-based BKD, is expanding Wealth Advisors into Colorado, opening a Denver office … Duff & Phelps won the “Advisory and Consultancy: Tax” award at The Drawdown’s inaugural Private Equity European Services Awards 2018.

Please send your professional and firm news to us at

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CPE events

  • Impact of Tax Cuts and Jobs Act on Valuation: Six Month Review (A Web Workshop) (June 27), with Stacey Udell (HBK Valuation), Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC), Michelle Gallagher (Gallagher & Associates CPAs), and Michael Morhaus (Anders CPAs + Advisors).

    Six months after the biggest change to the tax law in over 30 years, an expert panel discusses the impacts for valuation professionals.

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New and Trending
LinkedIn Discussions

AICPA Says Non-CPAs Can Be Eligible for the ABV

BV Experts Clash Over Statistics

The “Value” of Beer—and Breweries—Is Rising!

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:
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In this issue:

ABV survey

NACVA confab

Buyout disputes

BV standards

Private discounts

ASA conference

DealStats demo

Cannabis valuation

Global news

BV movers . . .

CPE events

LinkedIn discussions


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