Proposed rule change cracks down on testifying experts

Too many experts who are not qualified are being allowed to testify in court, and this has triggered proposed changes to strengthen Rule 702, which is the federal rule of evidence regarding testifying experts. If adopted, the changes will result in more experts being excluded from testifying.

Getting lax: There has been debate in the legal community over whether the courts are performing their gatekeeping function as rigorously as originally intended, according to an article in the April issue of Business Valuation Update. Under Daubert or similar standards, courts are supposed to disqualify testifying experts who are not competent or who can’t offer helpful evidence. But the courts have been getting somewhat lax about this.

In a recent case, a motion to exclude an appraiser was denied, even though the appraiser was a “ripe target” for disqualification. This is an example of what’s been going on: The courts just let the experts testify, and then the judges decide on the weight to give that testimony, or they defer that decision to the jury. But this is not what was intended—hence, the proposed changes to Rule 702.

New case affirms treatment of goodwill in Indiana divorces

In Indiana, enterprise goodwill is includable in the marital estate, but personal goodwill is not (see BVR’s Charting Goodwill map). A recent case affirms this and also affirms that testimony should be given as to the amount of personal and enterprise goodwill in order to have the court determine the amount to be included in the marital estate. The valuation was done by a court-appointed expert, who appraised the wife’s home healthcare businesses (she was a registered nurse). The wife appealed the court’s decision to include enterprise goodwill in the marital estate and asked the court to ignore the expert’s testimony. She contended that the asset approach should be used for the valuation (assets minus liabilities), but the appraiser rejected that approach because it does not reflect any goodwill. The appellate court affirmed the decision of the trial court.

The case is Adewopo v. Jaja, 2022 Ind. App. Unpub. LEXIS 58; 2022 WL 18960, and a case analysis and full opinion are available on the BVLaw platform.

Mercer examines appraisal review

After a two-month break from his blog, veteran valuer Chris Mercer (Mercer Capital) has started a series of thoughtful posts focusing on appraisal review, a process he deems “essential.” In his first post, he talks about when appraisal reviews are important, what the reviewer needs to know before doing a review (i.e., valuation body of knowledge), and an effective methodology for reviews. Bottom line, “replication lies at the heart of good appraisal review,” he writes. That is, given what’s presented in the report, the reviewer should be able to come to the same outcome.

Let us add that, while having a solid body of BV knowledge is essential to a thorough review of a valuation report, having a layperson also review the report can be very helpful. A person who knows nothing about business valuation, or is not numbers-oriented, should be able to grasp the “story” behind the valuation. If the valuation is of a going concern, the reader should come away with what makes the company tick and clearly see how the report’s narrative ties to the numbers.

In future posts, Mercer will discuss appraisal review methods in detail. Recommended reading!

AICPA offers free webcast on estate/gift valuations

A two-and-a half-hour webcast on estate and gift valuations is available free of charge from the AICPA. The webcast covers fundamental gift and estate strategies and discusses potential updates from the new administration that could impact estate and gift planning and valuations. It also discusses gifting in the current economic environment and considerations for valuation professionals (alternatives to lifetime exemption and low interest rate environment). The webcast is part of a course Jim Hitchner (Financial Valuation Advisors) created. You can access the estate/gift webcast if you click here (you’ll need to sign up for a free account on the AICPA website).

Yeanoplos honored with ASCPA life membership

Earlier this year, we ran an item about how the future of the valuation profession depends on practitioners giving back to the profession. Here is a perfect example of what we’re talking about.

Congratulations to Kevin R. Yeanoplos (Brueggeman and Johnson Yeanoplos PC) for being selected to receive a life membership to the Arizona Society of CPAs (ASCPA) as recognition for his many contributions to the society and the profession. He has served on the society’s board of directors, on the Business Valuation Committee for six years, and chaired the Business Valuation/Forensic Litigation Services Conference Committee during his decade of service on the committee.

“He’s been involved and participated in so many conferences as a speaker and leader, and he has put in a tremendous amount of effort and time,” said Brendan J. Kennedy (ATLAS CPAs & Advisors PLLC). “He has given back to the community individually, and we all owe a bit of a debt of gratitude for the people that are willing and able to do that.”

Yeanoplos, who has the CPA/ABV/CFF and ASA credentials, is director of valuation services for his firm, which has offices in Seattle, Phoenix, and Tucson and specializes in the areas of business and intellectual property valuation, financial analysis, and litigation support. He lectures and presents on topics such as business valuation. We here at BVR are honored to have him serve on our editorial advisory board, and he has contributed articles, co-wrote books, and has conducted webinars and conference presentations for us.

Yeanoplos is one of 63 to have received the award in the ASCPA’s 89-year history. He will be honored at the ASCPA Annual Meeting and Awards Luncheon on May 12 at the Arizona Biltmore.

2022 FactSet Mergerstat Review available for preorder

The 2022 edition of the FactSet Mergerstat Review delivers comprehensive rosters and statistics on mergers and acquisitions between US, UK, and global privately held, listed, and cross-border enterprises. This is one of the most referred-to sources of industry pricing, premia, and payment terms. Each annual subscription includes current updates via the Mergerstat Monthly Review, a monthly update on M&A activities, trends, and deal data by industry.

CBV Institute adds 69 new members

Now with about 2,300 members, the CBV Institute, Canada’s valuation professional organization (VPO) and standard, recently added 69 new members to its ranks of professionals entitled to use the CBV designation. In 2020, the organization saw membership grow 6%, the most in the last decade, from 2,086 members in 2020 to 2,215 members in 2021, according to its latest year in review. CBV Institute members have the Chartered Business Valuator (CBV) designation. It holds an annual conference, the CBV Congress, which BVWire attends. The next CBV Congress is scheduled for June 6-7 in Vancouver (click here for details).

BV movers . . .

People: After nearly 16 years as the secretary general for the International Association of Certified Valuation Specialists (IACVS), Robert “Bob” Brackett has retired; he has been a member of the business valuation community for 30 years and practiced and conducted BV training in many parts of the world, leaving a “legacy of goodwill that shall be long remembered,” the IACVS said in a statement … Mark Dayman, CPA/ABV/CFF, ABAR, CVA, has joined Dayton, Ohio-based Brady Ware & Co. as a partner of Strategic Valuation and Advisory Services; he has more than 40 years of experience helping clients with litigation support in the areas of commercial damages, eminent domain, IP, family law, and franchise disputes across a wide range of industries including real estate, hospitality, franchises and the franchise business model, and technology, among others … Rebecca Upton MBA, CPA, CVA, has been admitted as a partner at Murfreesboro, Tenn.-based Dempsey Vantrease & Follis PLLC (DVF); she has more than 20 years of public accounting experience, specializing in tax and business consulting and working largely with small businesses and medical clients and also provides valuation and litigation support services.

Firms: Houston-based Weaver is adding in Levine & Seltzer LLP of New York City, a firm that provides accounting, audit, and advisory services to clients across a wide range of industries, with particular focus in real estate and high-net-worth individuals and their companies; the deal expands Weaver’s New York practice by 24 team members … New York City-based EisnerAmper LLP is acquiring Popper & Co. LLP of New York City, a firm that provides sophisticated tax planning, tax compliance, and estate/gift planning services for high-net-worth individuals and families in New York, Florida, California, Texas, and other states.

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

CPE events

• The Long Arm of the Bankruptcy Court: Valuation in Fraudulent Transfer Matters. March 29, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Jeff L. Baliban (Citrin Cooperman).
  CPE credits: 2.0.

Under U.S. bankruptcy laws, payments and asset transfers companies made before insolvency can be later reversed or voided and pulled back for allocation to other creditors. While not precisely a lost profits or damages calculation, fraudulent transfer is an area where attorneys require significant input and expertise from financial valuation experts.

• ABCs of Intangible Asset Valuation. March 30, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Nene G Gianfala (Chaffe & Associates). CPE credits: 2.0.

Refresh your fundamentals on valuing intangible assets and learn about current hot topics. To pull it all together, a case study will demonstrate how to determine the value of goodwill and other intangible assets in a business combination.