4 posts categorized "Valuation" Feed

Planning, valuation could have saved Franklin’s heirs $20mil

ArethaAretha Franklin, the “Queen of Soul,” passed away last month in her birthplace of Detroit after six decades reigning the music industry. The first woman inducted into the Rock and Roll Hall of Fame, Ms. Franklin leaves behind legendary hits and performances and a legacy many entertainers only dream of achieving. What she didn’t leave behind, however, is a will.

Without a will in place, it’s now up to the state of Michigan to determine how her reported, yet unconfirmed, $80 million net worth is divided among her four children. And that amount could rise as her estate is valued. In hindsight, with some tax and financial planning, and a quality valuation—even just a few months ago—Ms. Franklin’s beneficiaries could have saved more than $27M in estate taxes.

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3 Pitfalls Valuation Professionals Should Avoid

Shutterstock_366281486When you hear the word measurement, what comes to mind? For most of us, measurement implies an exact science. However, there are situations, especially in the financial sector and broader business community, where measurement is not so easily defined or performed. And one of those situations is fair value measurement.

What makes fair value measurement such a challenge is that, unlike real property and other tangible assets (which can be objectively measured and valued), there’s tremendous subjectivity and diversity within the available and applicable valuation resources, guidance and methodologies. This diversity often manifests itself in inconsistent application and documentation which, in turn, can result in valuation deficiencies.[1] The reaction to these valuation deficiencies can be seen in heightened regulatory scrutiny and diminished investor confidence.

As regulators and investors continue to push for greater transparency in financial markets, both domestically and internationally, financial statement disclosures that rely on professional judgment generally – and fair value measurement specifically – will continue to receive scrutiny.

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Enhancing the Uniformity of Fair Value

GlassesIn 2014, valuation professionals responding to an American Institute of CPAs (AICPA) survey identified a 30% rise in demand for fair value for financial reporting. Specifically, the survey highlighted both fair value and intangible assets as emerging issues. This comes as no surprise given an increasingly global market rife with corporate acquisitions beyond borders. Also reported was an increase in the prevalence of complex assets such as intellectual properties, whose values cannot be calculated with complete objectivity. The growing demand for fair value – coupled with the subjectivity of valuing entities and intangibles – carry with them an obligation for the profession to protect the public interest by lending clarity, consistency and transparency to fair value practices.

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Six Tips for Valuation Experts in High Stakes Divorces

Man signing divorce papersThe headlines announcing Brad Pitt and Angelina Jolie’s divorce were just the latest in a slew of stories about celebrity splits. In fact, there are more than 800,000 divorces and annulments in the United States each year, according to government statistics. Based on my experience performing valuations in many high-profile divorces, much of the advice I’d offer to my fellow practitioners applies whether you’re working with Brad and Angelina or the divorcing, high-powered owner of a local business. Below are my top tips:

  1. Determine what’s at stake and how location matters. The assets in a divorce will typically include cash, retirement funds or a home. Often, the largest asset at stake is a closely held business. That can be a professional practice – if one or both partners are, say, a lawyer, physician or accountant – or an operating entity, such as a retailer, wholesaler, manufacturing business or a farm. The complexity of the engagement can be affected by the jurisdiction in which the case is being heard and can depend on state law. Be prepared, as the legal environment may produce unexpected complexities.

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