Becoming a Better Expert Witness
Earlier this year, the AICPA Forensic and Valuation Services Conference was held in Orlando. In the past, forensic services and valuation services held separate conferences; this year, in recognition of the fact that many CPAs perform a combination of these services, the two events were joined. As many as eight concurrent sessions were available to attendees on topics including basic, advanced and practical forensic and valuation issues; practice management and marketing; and litigation issues.
As a CPA who performs primarily valuation services for litigation, two issues of particular interest for me were expert testimony and the cost of capital in business valuations. Ron Seigneur moderated a panel of three attorneys in a session titled “What Do Lawyers Really Say About FVS Experts?” This session was a great look into what attorneys are looking for in an expert and how expert testimony can be most effective.
There were also several discussions related to developing the cost of capital for valuation engagements, as this continues to be an issue for appraisers. “Hardball with Hitchner” was a panel discussion moderated by Jim Hitchner, which included business valuation experts as panelists. They addressed the use of Duff & Phelps versus Morningstar Ibbotson data for developing the cost of equity. Generally, panelists seemed to consider both sources in their analyses. There was also discussion of whether appraisers should use an average risk-free rate, since current risk-free rates are historically low. It does not sound as though this is being done widely, but it could be something to consider depending on the engagement.
Also addressing the cost of capital was Ted Israel’s “Risky Business – The Generous Helping of Company-Specific Risk That May Already Be Included in Your Size Premium.” Ted identified factors that can affect the company-specific risk premium and demonstrated methods for using Duff & Phelps data to minimize what must be captured through an additional premium.
It was an excellent conference and I came back to my office with several ideas to consider in my work. I am looking forward to the 2013 AICPA FVS Conference. You may also be interested in the 3-day hands-on AICPA Expert Witness Skills Workshop to enhance your skills for delivering effective expert testimony.
Candice Bassell, CPA/ABV/CFF, Senior Manager – Valuation Services, Grant Thornton LLP. As a Senior Manager with Grant Thornton LLP, Ms. Bassell specializes in the valuation of closely held business interests for purposes of litigation support (marriage dissolutions and shareholder suits), estate planning and taxation, and financial statement reporting.
Expert witness image via Shutterstock