Final version of global BV glossary released
The International Valuation Glossary—Business Valuation has been completed, and a final version has been released. You can access it if you click here (free registration required). A working group made up of members of the American Society of Appraisers (ASA), Royal Institute of Chartered Surveyors (RICS), Saudi Authority for Accredited Valuers (TAQEEM), Canadian Institute of Chartered Business Valuators (CBV Institute), and the International Valuation Standards Council (IVSC) developed this new version, which is intended to replace the glossary last published in 2001.
Not authoritative: Is the new glossary an authoritative document? The working group does not intend the new glossary to be authoritative. The ASA, RICS, TAQEEM, and the CBV Institute will adopt and publish the new glossary as a practice aid/guidance to their members. The IVSC is supportive of the new glossary, but the International Valuation Standards (IVS) define only terms used within IVS. The working group encourages other organizations to use and reference the glossary in any way they see fit.
The process of developing the new glossary was a challenging one and was designed to build consensus. Subject matter experts were consulted, as were other organizations, such as IACVS, the National Association of Certified Valuation Analysts (NACVA) and The Appraisal Foundation. A draft version was issued in December 2020, and public comments were solicited. All comments received were given thorough consideration by the working group and addressed in the final version as appropriate.
Stay tuned for more news on the glossary, including some comments from members of the working group.
Will the landmark ESOP valuation case open the door?
During an amazing webinar with the testifying experts in the recent Walsh v Bowers ESOP case, a question came in from the audience: “Do you think this case will open the door for the Department of Labor and the valuation profession to work together to develop guidance around ESOP valuations?” The hope is that it will, say Ken Pia (Marcum LLP) and Ian Rusk (Rusk O’Brien Gido + Partners LLC), who testified for the defense and gave webinar attendees an inside look at the valuation issues in the case.
The idea of the valuation profession working with regulators has worked in other areas of valuation. For example, the Appraisal Issues Task Force is a voluntary group of valuation professionals who work with the FASB and the SEC to evaluate proposals and recommend methodology, assumptions, and approaches in the area of fair value for financial reporting. A similar mechanism could be set up between ESOP valuation professionals and the DOL. Pia and Rusk say the profession would welcome that kind of collaborative effort.
A recording of the webinar with Pia and Rusk is available if you click here (free to holders of BVR’s Training Passport when available).
Appellate court KOs unaccrued interest on dissipated assets
In a divorce case, an appellate court vacated the order of the trial court that erroneously charged the husband with over $4 million in unaccrued interest on marital assets that the husband fraudulently dissipated from the marital estate. This altered the equitable distribution, so the case was further remanded to the trial court to issue a new order in accordance with the appellate court’s opinion.
Both the husband and wife were accountants, but the wife left her job in 1990 to “tend to the children.” The husband purchased and operated various real estate entities during the marriage, and he created trusts for the parties’ children that ended up being valued at over $9 million. The wife claimed she did not know of the trusts until after the couple separated. She claimed that the transfers to the trust were fraudulent transfers, and the value of the trusts should be charged against the husband in the parties’ equitable distribution scheme. The husband claimed that he had told the wife of these trusts. The trial court deemed the husband’s transfers of assets to the trusts for the children to be fraudulent and void and thus chargeable against the husband in the equitable distribution. The court also charged the husband with $4 million of unaccrued interest, but the appellate court vacated this.
The case is Mohen v. Mohen, 2021 Pa. Super. Unpub. LEXIS 2560; 2021 WL 4281296 (Sept. 21, 2021). A case digest analysis and full court opinion are available on the BVLaw platform.
FASB updates Topic 805 on business combinations regarding deferred revenues
The Financial Accounting Standards Board (FASB) announced an update to its business combinations standard (Topic 805) aimed at clarifying how to apply requirements under its revenue recognition rule. The update requires companies to apply the new revenue recognition standard, ASC 606 (Revenue From Contracts With Customers), which will result in companies recognizing contract assets and contract liabilities at amounts consistent with those the acquiree recorded immediately before the acquisition date. This is expected to result in the acquirer recognizing more revenue in its post-acquisition financial statements related to acquired deferred revenue. Prior to this update, fair value measurement commonly resulted in a reduction, or “haircut,” to the amount of deferred revenue that was previously recognized in the acquiree’s financial statements prior to the acquisition.
The update applies to all entities that enter a business combination within the scope of Subtopic 805-10 (Business Combinations—Overall). The amendments are effective for public companies for fiscal years beginning after Dec. 15, 2022, including interim periods within those fiscal years, and for all other entities beginning after Dec. 15, 2023, including interim periods within those fiscal years. Early adoption is permitted.
PCAOB 2020 inspection reports released
The Public Company Accounting Oversight Board (PCAOB) has issued its 2020 annual inspection reports for the largest U.S. audit firms, including each of the Big Four, BDO, and Grant Thornton. The inspections look at a wide variety of audit issues, including fair value measurements. The majority of the annually inspected audit firms had fewer findings in 2020 compared to 2019 inspections. In audit firms that are inspected every three years, “some improvements were noted, although deficiencies continue to remain high,” according to a PCAOB staff update on the 2020 inspections.
New edition of a guide on valuing FLPs
BVR is happy to announce that the Comprehensive Guide for the Valuation of Family Limited Partnerships and LLCs is the newest addition to its bookstore. This is the 6th edition of this book, and it includes all new updates since the last edition was released in 2018. This new edition has five new case study valuation examples, an updated study on market pricing of liquidating noncontrolling real estate interests, using the best empirical data in a valuation, and more. The book’s authors are Bruce A. Johnson, James R. Park, and Spencer Jefferies, and Partnership Profiles Inc. publishes the book.
Global BV News
TAQEEM launches study on the value of camelsThe Saudi Authority for Accredited Valuers (TAQEEM) has signed a memorandum of understanding with the Camel Club to develop standards and criteria for evaluating the market value of camels, according to a news release. Under the agreement, the Camel Club will contract with a consulting firm to prepare a market study for the camel sector in all regions of Saudi Arabia. TAQEEM will develop a professional guide for evaluating camels as biological assets and the intangible assets they include, such as goodwill