Damodaran to give critical perspective of ESG

Never one to mince words, Aswath Damodaran (New York University Stern School of Business) called it “the most overhyped, oversold concept in the history of business.” That was back in 2020, and he was talking about environmental, social, and governance (ESG) factors. After mulling it over for a year, he reaffirmed his position and added a few more choice words, saying, “It’s become a gravy train for all the people who make money on ESG.” Fast-forward two years later to today: Has he changed his tune? Find out at the ASA Spring Fair Value Conference in New York City on May 4 where he will do a session, ESG and Valuation—A Critical Perspective. The full agenda for the conference is available if you click here. Don’t miss it!

Court do-over to figure passive appreciation for divorce

In an Ohio divorce case, the trial court made an award to the wife based on the full fair market value of the husband’s business. But the business was started prior to the marriage, and, in Ohio, only the active appreciation of a business during the marriage is marital property. Any passive appreciation goes to the business owner. The husband appealed, and the appellate court remanded the case back to the trial court. The experts for each side will have to value the business as of the date of marriage and also as of the date of divorce. The increase in value then must be broken down into active and passive components, recognizing the contribution of each to the business.

The case is Fordeley v. Fordeley, 2023-Ohio-261; 2023 Ohio App. LEXIS 240; 2023 WL 1097726, and a case analysis and full court opinion are on the BVLaw platform.

Passive calculator: Dr. Ashok Abbott (West Virginia University) has developed an online application that produces a passive appreciation factor on a national level for businesses in the retail sector. Just choose the type of retail business and enter the beginning and end dates for the valuation. The application is live and available for testing purposes if you click here. The application embodies Dr. Abbott’s methodology from his peer-reviewed paper (click here). Feedback is welcome!

Tax returns as a source of historical data

The vast majority (91%) of valuation experts say federal tax returns are crucial or very important sources of historical financial data. In addition to the IRS Forms 1120 and 1065, many respondents (81%) get the Schedule C from the 1040 and two-thirds say they get the Schedule E. Over half (55%) get the Form 8825. Virtually all respondents (95%) get the returns in PDF form, and about the same percentage (91%) do not use software to extract the data. Our thanks to the 43 respondents who took the survey.

New edition of BVR’s guide to economic damages is available

The Comprehensive Guide to Economic Damages, already the profession’s leading guide of its type, is now even more wide-ranging in its new 7th edition, which has just been released. Existing chapters were revised as needed, and new chapters were added, including:

• Chapter 29, “Lost Profits Analysis in Cannabis Establishments” (Ryan Cram and Ron Seigneur);

• Chapter 30, “Economic Damages in Cryptocurrency” (Nicholas Oldack); and

• Chapter 35, “Commercial Success” (Richard F. Bero and Shane A. Brunner).

This new edition, edited by Jimmy Pappas, Bill Scally, and Steve Veenema, features 50 chapters drawing on the expertise of nearly 70 financial experts and attorneys. It is available now in the BVR bookstore if you click here. For those of you who have the BVResearch Pro platform, the book is included at no extra charge and is automatically added to your library.

Stout updates its restricted stock study companion guide

The 2022 edition of the “Stout Restricted Stock Study Companion Guide” is now available, and it reflects updated tables and graphs that contain new transactions. The study is the most widely used restricted stock transaction database for providing empirical support for a discount for lack of marketability (DLOM). The study is updated quarterly and contains over 770 screened transactions with up to 60 data fields. The database includes the Stout Calculator, which makes it easy to use Stout’s methodology and determine a DLOM driven by the financial characteristics of your subject company, as well as the volatility of the market. This is the preferred analysis as opposed to a simple listing of all the studies and their average discounts and then estimating a DLOM from these benchmark averages. To download the new “Stout Restricted Stock Study Companion Guide,” which is free to everyone, click here.

Free e-book: home care medical director compensation

Based on national market data from several independent third-party surveys, the median hourly rate for home care and hospice medical direction ranges from $115 to $150, according to a free e-book from Buckhead FMV. The resource, Compensation Philosophies as Compliance Tools for Contracted Medical Directors, includes tips on implementing compensation philosophies as compliance tools, compensation philosophy examples, advice for selecting compensation benchmarks, and instructions for converting annual compensation data into hourly rates.

CFA Institute issues Kroll’s global cost of capital 2022 summary edition

The CFA Institute Research Foundation has put out the “Valuation Handbook—International Guide to Cost of Capital 2022 Summary Edition” from Kroll. This 179-page work provides interpretive analyses and insights through June 30, 2022, and is an abridged version of the research and data that are available through the Kroll Cost of Capital Navigator. The publication examines the important difference in risk characteristics of investing in various countries and has the following seven chapters:

1. “International Cost of Capital Overview”;

2. “Strengths and Weaknesses of Commonly Used Models”;

3. “International Equity Risk Premia”;

4. “Country Yield Spread Model”;

5. “Relative Volatility Model”;

6. “Erb-Harvey-Viskanta Country Credit Rating Mode”; and

7. “Firm Size and the Cost of Equity Capital in Europe.”

The publication is free of charge, and you can download it if you click here.

BV movers . . .

People: The National Association of Certified Valuators and Analysts (NACVA) has named its outstanding members for the first quarter of 2023: Karen M. Lascelle, CPA, CVA, CFE, director/shareholder at Plodzik & Sanderson PA (Concord, N.H.), and Peter Vollers, MBA, CVA, CMEA, managing director of Pilot Valuation LLC (Richmond, Texas).

Firms: Brinker Simpson & Co. (Media, Pa.) officially welcomes LimorGoodman, an accounting and consulting firm based out of Bala Cynwyd, Pa.; the combined firm has a full-time roster of 67 employees, including 13 partners … Gift CPAs, a small-business accounting and advisory firm headquartered in Mechanicsburg, Pa., expanded its Harrisburg location with the acquisition of CLN Accounting LLC, which has been serving Harrisburg and the surrounding communities since 1988 … In Canada, Calgary, Alberta-based MNP is adding Edmonton, Alberta-based SVS Group LLP, effective June 1; SVS has six partners and 40 team members who provide a range of professional services, including accounting and taxation services, to organizations throughout Edmonton and Northern Alberta.

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

CPE events

• Multidisciplinary Blind Spots #5—Time, March 22, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Dennis A. Webb (Primus Valuations). CPE credits: 2.0.

With real estate holding companies, the timing of an exit event is the single most important variable affecting value.

• Artificial Intelligence and the Future of Valuation, March 29, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: R. James Alerding (Alerding Consulting). CPE credits: 2.0.

Artificial intelligence is definitely coming to valuation, so here are some thoughts on how it might impact the appraisal of a business.