BVR Power Panel offers insights into recent issues

BVR has an ongoing webinar series of Power Panels, consisting of veteran practitioners and thought leaders covering recent trends and issues. The latest program was last week and featured Ken Pia (Marcum)—who also acted as moderator—Jeff Tarbell (Houlihan Lokey), Neil Beaton (Alvarez & Marsal), and Michelle Gallagher (Adamy Valuation). Here are a few key points they made:

• In litigation, make sure you know what the other expert will bring to court—you don’t want to show up with a few documents while the other expert brings a full-blown report;

• Credentialed business valuers can qualify in court as experts in reasonable compensation, but consider using a specialist for certain niche sectors or if the issue creates a huge gap between opposing experts;

• The trend is for more cases to head to mediation, and experts are getting calls directly from mediators to act as consultants;

• Make sure staff—especially younger staff—get training in soft skills, such as how to communicate with clients, network, make presentations, build a book of business, etc.

• Guidance is in the works on company-specific risk that will “move the needle” but will not provide a silver bullet for estimation purposes; and

• The issue of control is not a black-or-white matter; it is a spectrum that requires an analysis of all the elements of control to estimate an adjustment (if you cannot use cash flows, that is).

Next quarter, the BVR Power Panel will be back with more thought-provoking discussions. A recording of the webinar is available if you click here (free for holders of the BVR Training Passport Pro).

Business as usual (so far) under tougher Rule 702

The first reported appellate decision to cite the new Rule 702 changes has appeared, but there’s no sea change to report. In fact, while the court cited the new Rule 702, it followed the old rules in making its decision about the expert’s testimony. The case involved a medical expert, but they’re in the same 702 boat as valuation and forensics experts, so the case (in the 1st Circuit) is notable.

In a blog post, BVLaw editor Jim Alerding takes a look at the case and refers readers to an article that goes into greater detail and aptly uses the phrase “old habits die hard.” The article notes that the ruling did not result in a “critical blow,” so hopefully the “incorrect” precedent it set will not affect future cases. Stay tuned!

The case is Rodriguez v. Hosp. San Cristobal, Inc., 2024 U.S. App. LEXIS 1301; 91 F.4th 59; 2024 WL 207717, and a case digest and full opinion are available on the BVLaw platform.

Exposure draft now available on fair value

The Business Valuation Resource Panel (BVRP) of The Appraisal Foundation (TAF) has issued an exposure draft of Valuation Brief #3: Professional Interactions Unique to Fair Value for Financial Reporting. It discusses some of the roles, interactions, and common issues encountered in the overall financial reporting fair value process among appraisers, management, and auditors. Comments are due March 31, which can be submitted if you click here.

The BVRP is a panel of leading business valuation experts, professionals, and academics appointed to provide input, recommendations, and updates from the business valuation discipline to the TAF boards. These briefs are designed as a “practical discussion” and are “not intended for other valuation contexts, nor to provide formal guidance or authoritative standards or commentary.”

Kroll-recommended ERP remains at 5.5%—for now

The latest cost of capital infographic from Kroll has the firm’s recommended U.S. equity risk premium reaffirmed at 5.5% when developing USD-denominated discount rates. But the global economic picture is such that “equity risk premia is likely to come down,” notes Carla Nunes, managing director, Valuation Digital Solutions/Office of Professional Practice at Kroll. The infographics, which include global market data and key economic metrics, also now include long-term real GDP and inflation forecasts.

‘Disclose me,’ AI tells appraisers

“Appraisers should be encouraged to clearly state whether they authored a report or relied on AI models for content generation.” This is a quote from an article written by none other than AI itself, “The Crucial Role of Verifying Appraiser Authorship,” in the January issue of the ARM E-Journal. The article was generated from a single prompt by Melanie Modica, ASA, ARM (Modica Fine Art LLC), which was: “Write a 1,100-word article about the importance of verifying an appraiser wrote a report or relied on ChatGPT for the content and why claiming authorship is important.” The two-page article took 22 seconds to complete, and editing was “extremely limited,” she says.

While Modica is neither advocating for the use of AI nor its exclusion, she is advocating for the disclosure of whether an appraisal or appraisal review report was “solely created by a credentialed appraiser human person, or not.” The AI-generated article also cited the “growing need for profession-wide standards and guidelines,” which, we point out, are currently in the works by the various valuation professional organizations (VPOs).

Extra: A BVWire survey found that 43% of respondents say they use AI to help write valuation reports.

What is your firm’s experience with remote work?

That’s the topic of this month’s “Two-Minute Practice Builder” survey. Is your firm back in the office or using remote or a hybrid work setup? What ideas and strategies have worked in terms of managing remote workers? Please take just a few minutes to give us your observations—click here to take a fast survey. The survey deadline is March 22, and we’ll share the results in the March 27 issue. Thanks for participating!

TAF launches second demographic survey

The Appraisal Foundation (TAF) has a survey designed to gather demographic data about the appraisal profession and help shape the group’s current and future diversity-related activities. In 2021, the organization conducted its first survey, and the results will be compared to this new survey. The survey deadline is March 13, and you can take it if you click here.

The IRS is looking for you

Don’t panic—it’s not about an audit. The agency needs to hire 31 business valuation experts in over 249 locations, according to a recently posted job announcement, which is available if you click here. The salary is $103,409 to $167,336 per year, according to the announcement. The IRS uses the title “financial analyst” for its business valuation specialists (the “appraiser” job title deals with real and personal property).

New IVSC Perspectives Paper examines the valuation of data

The International Valuation Standards Council (IVSC) has its sights set on data and how to value it. “The next revision of IVS could conceivably include more explicit references to data as an asset,” says the paper, titled “Valuing Data,” written by Nicolas Konialidis, IVSC technical director, Business Valuation Board. The paper examines:

• What is meant by data as an asset;

• How it acquires and eventually loses value;

• How it is accounted for under selected current accounting standards; and

• What valuation professionals should keep in mind when valuing data.

It is possible that this topic may be included in the forthcoming public IVSC agenda consultation as a precursor to changes in the standards, the paper notes.

BV movers . . .

People: Ryan Lubinski, CPA, CVA, has been appointed a partner at MichaelSilver (Deerfield, Ill.); he has over 12 years of experience providing accounting, business valuation, and compliance and consulting services to a wide range of industries including manufacturing, automobile dealerships, retail, distribution and logistics, and employee benefits plans … Several announcements from Mercer Capital: Nicholas J. Heinz, ASA, and Bryce Erickson, ASA, MRICS, have been named managing directors, and Bryce has also been elected to the firm’s board of directors; Lisa L. Doble, JD, has been named chief administrative officer; and Barbara Walters Price has been named chief marketing officer … Evlon Charles has joined FORVIS in Houston as a managing director on its valuation team; prior to joining the firm, he worked in various valuation roles at international accounting firms with a focus on the financial services sector … Don Bays, CPA, ABV, CVA, CFF, has joined BeachFleischman in Phoenix as a senior director for the firm’s Financial Forensics & Valuation Services practice; he has over 35 years of experience and provides services for marital dissolution, economic damages, and other litigation matters, giving expert testimony in matters such as insurance fraud, contract disputes, lost earnings, professional liability issues, and property settlement matters related to marital dissolution … Jamie McIntyre, JD, has been named a partner at HealthCare Appraisers, an employee-owned, national healthcare valuation and advisory firm.

Firms: Columbus, Ohio-based GBQ Partners LLC has launched Environmental, Social & Governance (ESG) Advisory & Assurance Services … Atlanta-based Mauldin & Jenkins has merged with CFO Navigator, a specialized firm in the metro-Atlanta area that helps companies leverage their financial data … Tampa, Fla., area firm Murtha & Murtha LLC is now operating as Murtha & Flischel CPAs, as the firm’s long-time senior accountant Kyle Flischel is now a named managing partner with fellow managing partner and co-founder Patrick Murtha.

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

CPE events

Is There or Isn’t There Goodwill: Expert Disagreements, March 12, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Josh Shilts (Shilts CPA, PLLC). CPE credits: 2.0.

Goodwill and common areas disagreed upon and causes, examples of effective communication techniques to exemplify your position, and how to mitigate bias are discussed in the context of divorce litigation in this presentation.

Recent Trends in the Valuation of Early-Stage Companies, March 14, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Antonella Puca (BlueVal Group) and Douglas Summa (IVSC). CPE credits: 2.0.

This presentation provides an overview of recent trends including guidance from the International Valuation Standards Council (including the most recent IVS 500), IPEV, and AICPA. Also, practical, step-by-step examples of how to handle some current challenges in early-stage valuation, such as the valuation of SAFEs, how to incorporate down rounds in the valuation, how to roll forward stale rounds, and how to incorporate projections related to cryptocurrencies are included.