New FASB Statement (No. 157) on Fair Value Measurements
A little over a week ago, the Financial Accounting Standards Board (FASB) released Statement No. 157, Fair Value Measurement. According to FASB’s summary, the new Statement:
Defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.
FSAS 157 does not trump other accounting pronouncements from the Board, and so does not require any new fair value measurements. “However, for some entities, the application of this Statement will change current practice,” most notably regarding applications of “exchange price” and other market-based measurements. The full statement is available at FASB.org; to read the summary, click here.
The latest ‘Rock Star’ of BV litigation
As most business appraisers realize by now, the recent McCord reversal didn’t swing on a valuation issue. “When you couple the post-valuation date events with the burden of proof obligation, the [5th Circuit] Court was left with no course but to go with the Taxpayer,” says Lance Hall, ASA (FMV Opinions, Inc., New York). “Proof positive that John Porter is the greatest trust and estates litigation attorney in the country.”
Porter, a partner with Houston’s Baker Botts, may deserve much of the credit for the latest BV-related appellate victory. (And he may soon stake another, as he’s the taxpayer’s attorney on the Jelke appeal, currently pending in the 11th Circuit; see BVWire # 48-1). “From my reading [of McCord], John’s victory was 100% a legal gamesmanship win,” Hall says. “He’s the closest thing we have to a Rock Star (in the mode of Eric Clapton) in the T&E business.”
Porter's next appearance will be in BVR’s Telephone Conference, “McCord Reversal and the Future of Marketability Discounts,” on October 18, 2006. Don’t miss this legal maverick as he takes the stage with Will Frazier, ASA of HFBE, Houston—the taxpayer’s appraiser in the original case, and also Steve Akers, Esq. of Bessemer Trust Company (Dallas). To register, click here.
Ever wonder who reads those comments to ASB Exposure Drafts?
“Every Board member reviews every comment that we receive,” according to Carla Glass, CFA, FSA, director, Privately-Held Company Valuations (American Appraisal Associates, Dallas), one of seven members of the Appraisal Standards Board (and its sole BV representative), which held a public meeting last week in Denver, CO. “We really read and study these, turn them into a QnA, an advisory opinion, or educational course materials.”
The ASB—which develops, interprets and amends the Uniform Standards of Professional Appraisal Practice (USPAP)—“cannot do our work effectively without these substantial comments and their reasonings,” Glass says. “We don’t look at letterhead or signature; we pay more attention to a well-written comment that makes a good point.” The Board met in Denver to discuss recent comments to USPAP’s Reporting Requirements; next on the agenda is a December, 2006 Exposure Draft regarding possible revisions to USPAP in the Supplemental Standards Rule, the Jurisdictional Exception, the Public Policy definition, and more.
Want an ASB member to appear at your local BV society? At the meeting, each of the Board members read off an impressive list of recent speaking engagements; for more on securing an ASB speaker, visit appraisalfoundation.org.
Fairness opinions: Investment bankers going where BV analysts belong
Fairness opinions may very well be the next frontier of business valuation—unless BV professionals are eclipsed by investment bankers. Case in point: Back in February, Jeffrey Williams, a former Morgan Stanley dealmaker, vowed to transform his investment banking boutique into a full-time, independent valuation outfit by the end of the year.
Williams is ahead of schedule; his new company web site (www.williamsnyc.com) currently boasts “objective, conflict-free valuation services” from principals who have “honed their valuation skills focusing on mergers and acquisitions at some of Wall Street’s most respected firms.” Yet neither of the two principals lists any valuation-specific accreditation in their lengthy resumes. And though they have apparently testified as expert witnesses, their biggest appearances may be in the news, as frequent sources for commentary in CFO.com articles.
How can BV analysts get a bite at the ‘fairness opinion’ apple?
In the post-Enron business world, regulatory scrutiny of fairness opinions will only increase: It’s already started with NASD’s Rule 2290, which is close to final. No doubt, business valuation professionals have the existing expertise to provide truly independent opinion analysis from either side of the deal-making table.
How to translate this expertise into real practice—and profits? In tomorrow’s Telephone Conference (September 28, 2006), BVR presents a panel of fairness opinions experts from the BV community, including Shannon Pratt, CFA, FASA, MCBA, CM&AA (Shannon Pratt Valuations), Craig Jacobsen, MBA, (Willamette Associates) and Jeff Tarbell, ASA, CFA (Houlihan Lokey). Register here now.
And for a free copy of Craig Jacobsen’s article on fairness opinion opportunities for BV professionals, recently published in the Business Valuation Update™, click here.
Valuing workers’ comp claims: Experience required
To value a subject business’ workers compensation experience, “You need an actuary,” says Chris Burand (Burand & Associates, LLP, Pueblo, CO), in response to our query in last week’s BVWire.™ “There are many firms that specialize in assessing the impact of workers comp claims. One that has a good reputation is Al Rhodes at SIGMA Actuarial Consulting Group, Inc. (firstname.lastname@example.org).” Another possibility is a firm that “specializes in assessing the mods relative to claims experience,” such as WorkComp Professionals (workcompprofessionals.com).
For those new to the insurance lingo, “mod” stands for Experience Modification Rating. “Workers comp rates have a set standard relative to the job classifications,” Burand explains, “but they can be modified based on claims experience resulting in either higher or lower than standard rates. This is something requiring significant expertise,” if an appraiser is to consider workers comp claims in their appraisals.
LexisNexis subscribers now have access to Daubert Tracker
One of the first tasks for any attorney on a valuation case—after checking which Judge will hear the case—is to do a quick “background” check on the opposing side’s appraiser, researching where that expert has testified, and how that expert fared in court. That search can now be done from an attorney’s desktop, thanks to a recent licensing agreement that will provide LexisNexis subscribers access to The Daubert Tracker™ database, touted “as the country’s largest repository of court decisions and documents relating to the admissibility of scientific evidence and expert witness testimony.” (Check out www.dauberttracker.com for more information.)
'Insights' on meeting the Daubert challenge. And appraisers may want to check out the upcoming fall issue of Insights magazine (Willamette Associates), which will feature an article by James Rabe and Anna Kamenova on the current, legal criteria for qualifying as an expert witness—and the challenges one is sure to meet from Daubert-savvy attorneys. For more information about this article or the Insights publication, contact the author at email@example.com.
And as subscribers to BVR’s Deluxe BVU already know, they can search for any valuation expert in any case (using the “department search” function of the database), and read the case abstract right on their computers. To subscribe, click here.
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