Category: Appraisal/Valuation

Re-writing Economic History with a Substantive Change to the GDP formula

The Bureau of Economic Analysis’ (BEA) report of Gross Domestic Product (“GDP”) is one of the most commonly used indicators of economic health.  It measures the total value of all finished goods and services produced in the U.S. within a specified period (normally a year). In July that number is guaranteed to go up, yet …

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Venture Capital Funding Declines in Southern California

The Los Angeles Times reported that venture capital funding has declined considerably in Southern California.  The article sourced data compiled from Dow Jones VentureSource, which provided the following statistics: Southern California companies raised $507.6 million from venture capital investors for Q1 2013, a 42% decline from Q1 2012 The amount raised in Q1 2013 was …

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Valuations should carefully consider application of the income and market approach

In a recent bankruptcy case, a plaintiff valuation expert provided, without proper justification, 70% reliance on what the Court described as a biased application of the discounted cash flow (DCF) approach to value (an income approach)  to determine her appraisal conclusions. The discounted cash flow analysis is a commonly-used, and conceptually excellent method of performing …

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Permanent link to this article: https://betweenthenumbers.net/2013/04/valuations-of-larger-companies-must-carefully-consider-the-market-approach/

PCAOB issues second mixed report on audits by smaller firms

On February 25, 2013, the Public Accounting Oversight Board (PCAOB) issued its summary report on smaller accounting firms. The PCAOB described its inspections and related reporting here as follows: “This report covers domestic audit firms that audit the financial statements of issuers, and that regularly issue 100 or fewer audit reports each year. Such firms …

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Context is Key in Judging RIM’s Corporate Name Change

On January 30, Research in Motion (RIM), the maker of BlackBerry mobile devices, announced that it had changed its corporate name to “BlackBerry.” Since the then, several news sources judged the success of the name change based on the subsequent price movement of the newly rebranded “BBRY” shares. Slate reports, for example, that “shareholders don’t …

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Private Annuity Transaction Upheld As an Estate Planning Tool

In the Estate of Virginia Kite vs. IRS, T.C. Memo 2013-43 (February 7, 2013), affluent taxpayers were given support for a potentially substantial estate planning tool. This is a significant decision. The Tax Court described the underlying facts as follows: “Under the terms of the annuity transaction, the Kite children would begin payments to Mrs. …

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Permanent link to this article: https://betweenthenumbers.net/2013/02/private-annuity-transaction-upheld-as-an-estate-planning-tool/

California Appellate Court criticizes expert witness exclusion in eminent domain case

Valuation in an eminent domain case is necessarily accomplished through experts. In County Of Glenn vs. Patrick Foley (California Third Appellate District, case no. C068750, November 26, 2012), the Trial Court was reversed with directions. The trial court had excluded the property owner’s valuation expert, thus effectively eviscerating the property owner’s case. The subject property …

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Closely-held corporations need reasonable compensation analysis

Reasonable compensation questions affect millions of closely-held corporations whose owners actively participate in the business. The issue involves how much payroll taxes are due from the earnings of the business. Amounts not characterized as salary are reported as S-corporation income on the shareholder’s personal tax return, where it is not subject to payroll taxes. In …

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HP to take legal action over its bold multi-billion dollar fraud allegation

In connection with its quarterly earnings release and a related $8.8 billion write-down, Hewlett-Packard claimed that it was misled by hidden “serious accounting improprieties” involving its $11.1 billion purchase of formerly-public company Autonomy. The Autonomy acquisition closed October 2011, under the watch of former HP CEO Leo Apotheker. Apotheker’s reign was short-lived (11 months), and …

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Business Interruption Insurance Reminders for Hurricane Sandy

Any insurance claim must start with a specific review of your policy. Nevertheless, the following items may be of particular interest in business interruption claims associated with Hurricane Sandy:           Check your policy for whether you have coverage for storm-related flooding. Many policies contain an exclusion for floods, unless you purchased …

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