Business Valuation & Litigation Support E-Newsletter: August 2010

Tuesday, August 24, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

FAQs About Business Valuations

From business acquisitions to estate planning to shareholder transactions, executives often run into situations in which performing a business valuation is necessary.

The primary pressure point is when it is necessary to determine the value of an ownership interest in a private company (non publicly-traded) for any number of financial and business reasons. Not anything that is traded on exchanges; we're talking about closely-held companies and small businesses.

Click here for the answers to these FAQs:

  • In what scenarios would a business valuation be needed?,
  • What are some critical factors in determining the value of a business?
  • Do values change over time?
  • How can valuation discounts impact the value of a business?
  • Who typically performs business valuations?
  • Why are credentials important?

Measuring the Intangible: Valuation Issues in Health Care Transactions

In the highly complex and heavily regulated world of health care, business valuations can be particularly challenging. This article looks at a recent U.S. Tax Court decision, Derby v. Commissioner, that illustrates this point. The case involved the sale of a medical group to a not-for-profit health care organization. The group claimed charitable tax deductions resulting from the transaction but the Tax Court denied the deductions, concluding that the physicians were unable to show that the value of what they received was less than the value of what they transferred. The article discusses the ins and outs of the case, noting that the court's decision demonstrates that valuation in the context of a health care transaction requires a valuator to look at intangible benefits and other relevant terms of the deal.

Click here to read the rest of this article.

Single Price Quote Supports $10 Million Lost Profits Award

A U.S. Court of Appeals affirmed a jury award of nearly $10 million in lost profits. Notably, the plaintiff's damages expert based his calculation on a single price quote by the plaintiff that had never been accepted by the defendant. This case confirms that companies are entitled to compensatory damages not only for designs and other confidential information they develop, but also for the profits their intellectual property is expected to generate.

Click here to read the rest of this article.

Skoda Minotti Employee Recognized For Outstanding Report Writing by National Association of Certified Valuation Analysts

We are pleased to announce that Sean Saari, CPA/ABV, CVA, MBA has received the 2010 Jeffrey R. Salins Report Writing Award from the National Association of Certified Valuation Analysts (NACVA).

Click here to read the rest of this release.

Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Business Valuation & Litigation Support E-Newsletter: July 2010

Tuesday, July 20, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

New expert discovery rules should reduce litigation costs         

This article discusses proposed amendments to the Federal Rules of Civil Procedure that will likely have a big impact on the attorney-expert relationship. One of the most significant changes is amended Rule 26, which will extend attorney work-product protection to draft reports by testifying experts and, with certain exceptions, to communications between experts and retaining counsel. It’s hoped that this will avoid needless discovery costs.

Click here to read this article.

Zubulake revisited: New guidance on e-discovery

A recent court case shows that sanctions can not only be awarded for deliberate destruction of discoverable data, but also when a party is grossly negligent. The court found that "failure to issue a written litigation hold constitutes gross negligence…." A sidebar to this article lists specific examples of gross negligence.

Click here to read this article.

How the recession has impacted business valuation

Should businesses that were valued on the eve of the economic downturn be revalued in light of subsequent events? This article looks at a Florida marital dissolution case in which a restaurant valued in December 2007 lost value during the recession that followed. This case confirms that, when valuing a business, appraisers generally shouldn’t consider events that take place after the valuation date. A sidebar examines Financial Accounting Standards Board standards regarding the treatment of subsequent events for accounting purposes.

Click here to read this article.

Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Business Valuation & Litigation Support E-Newsletter: June 2010

Wednesday, June 30, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month’s issue of Valuation & Litigation Advisory Insights includes the following articles:

Nonqualified deferred compensation: Independent appraisals offer protection against 409A challenge         

Businesses that provide employees with stock options, stock appreciation rights (SARs) and other types of nonqualified deferred compensation have been subject to Internal Revenue Code Section 409A for years. As you can imagine, compliance is particularly challenging in the current economic environment. To avoid Sec. 409A problems, options and SARs must be issued at or above fair market value, so accurate valuations are critical. It’s important to know what Sec. 409A requires and how to establish fair market value. Three "presumptive" valuation methods are discussed.

Click here to read this article.

Damage control: Surviving a business interruption

Whether it’s minor, such as a lightning strike that shuts down production for a day, or major, such as a lengthy labor strike, a business interruption not only reduces income, but also simultaneously creates new expenses. The key to surviving a business interruption is to restore normal operations as quickly as possible. Insurance plays a critical role. This article explains business interruption insurance, how to file a claim, what to do to mitigate loss, and how to establish a loss period. A sidebar addresses scope-of-coverage issues.

Click here to read this article.
 
"Fair value" in a troubled economy

Last year, Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 157 took effect. The statement, entitled Fair Value Measurements, provides guidance on measuring fair value for purposes of several accounting standards, and establishes a "fair value hierarchy" that emphasizes market-based valuation methods. This article explains how it works. A sidebar discusses a few opportunities to explore in this down economy.

Click here to read this article.


Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Business Valuation & Litigation Support E-Newsletter: May 2010

Thursday, May 20, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month’s issue of Valuation & Litigation Advisory Insights includes the following articles:

Lucent Sheds Light on Patent Infringement Damages

Courts are generally loath to disturb a jury’s verdict on damages. But an appeals court threw out a $350 million patent infringement award that wasn’t supported by substantial evidence. This case illustrates the need for detailed expert testimony, which will establish credible evidentiary facts and conclusions and, thus, support a claim for patent infringement damages.

Click here to read this article.

Valuing Pass-Through Entities vs. C Corporations  

Valuing interests in pass-through entities can be deceptively complex. This complexity stems from a mismatch between the data commonly used to value privately held companies and the tax benefits associated with pass-through entities. But, in recent years, several analytical models have been developed which provide a more accurate picture of a pass-through entity’s economic benefits.     

Click here to read this article.

What’s behind the veil? Digging for the truth in alter-ego cases 

When a plaintiff can’t collect a judgment from a corporation and seeks to obtain it from the corporation’s owners, it may try to show that the corporation and its shareholders lack separate identities — that is, the corporation is the owners’ alter ego. Key factors in determining an alter-ego relationship include not only this lack of separateness, but also financial dependence of the corporation upon its shareholders or parent, and undue influence upon a corporation.

Click here to read this article.

Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Business Valuation & Litigation Support E-Newsletter: April 2010

Monday, April 26, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month’s issue of Valuation & Litigation Advisory Insights, includes the following articles:

Struggling Economy Presents Business Valuation Challenges     

In bad times, appraisers may face a disconnect between the income and market approaches, creating a wide gap between valuations. The challenge becomes reconciling these differences. This article explains how to approach valuation for both profitable and distressed companies, and notes that the purpose of a business valuation can have a big impact on the valuation methods that are used. A sidebar looks at one case in which a court rejected the uses of the discounted cash flow method by both the creditors’ and the debtors’ experts.

Click here to read this article.

Nonpublic Information Considered in Valuing Securities

In one recent case, a district court held that it was reasonable for a jury to conclude that material nonpublic information possessed by the defendants affected the fair market value of certain securities. The case is significant because it seems to offer a novel interpretation of the phrase "reasonable knowledge of relevant facts" in the definition of fair market value. The decision suggests that even nonpublic information can be a "relevant fact."     

Click here to read this article.

Are Valuations Recyclable?

The paper a valuation report is printed on may be recyclable, but in most cases the content is not. This article points out that recycling valuations poses two major problems: First, the value of a business or other asset can change dramatically over time — in some cases, overnight. Second, a valuator’s methods depend to a large extent on the valuation’s purpose.  The article discusses the problems that can ensue when business owners are tempted to stretch their valuation dollars by using a single valuation for several different purposes.

Click here to read this article.

Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Business Valuation & Litigation Support E-Newsletter: March 2010

Thursday, March 18, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:


IP Valuation Using the Relief From Royalty Method            

In today's business environment, the valuation of intellectual property (IP) is critical - both to comply with accounting rules and for purposes of financial reporting, tax compliance, litigation, or sale or licensing transactions. Several methods can be used to value IP. One of the most effective can be the relief from royalty (RFR) method. This income-based method estimates the portion of a company's earnings attributable to an IP asset based on the royalty rate the company would have paid for the use of the asset if it didn't own it.

Click here to read this article.

Valuation Critical Under New M&A Rules  

Sweeping changes to the accounting rules for mergers and acquisitions (M&A) will start affecting many companies that are closing deals this year. FASB SFAS No. 141(R), Business Combinations, was issued in late 2007, but it applies to deals closing on or after the first day of the first annual reporting period beginning after Dec. 15, 2008. This article explains how many of the changes prescribed in this 358-page document increase the importance of having accurate valuations.      

Click here to read this article.

Putting a Price on Technology

Valuing technology-related intellectual property (IP) can be an enormous challenge for lawyers and valuation experts. It considers the degree of legal protection associated with technology IP as well as the economic benefits a company is expected to derive from that protection. Typically, valuation experts analyze the various economic benefits associated with a technology IP asset separately, and will use different approaches depending on whether  a patent is associated with developed technology, in-process research and development, or future technology. There are a variety of contexts in which the need to value technology IP can arise.

Click here to read this article.

Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Special Delivery E-Newsletter: February 2010

Sunday, February 28, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

Advisor Insights

This month, our monthly Advisor Insights column in Smart Business Cleveland Magazine takes a look at lessons learned from the real estate industry.

Having a finite resource as your business's main asset has proved challenging for real estate companies, but it also has necessitated some creative problem solving.

Click here to read the full article,
"Lessons learned from the Real Estate Industry."


Administration Outlines 2011 Tax Proposals 

On February 1, 2010, the Treasury Department released General Explanations of the Administration's Fiscal Year 2011 Revenue Proposals ("Green Book"), which provides a description of the Obama Administration's budget proposals affecting revenues. These proposals are an outline of the Administration's policy initiatives, and will serve as the blueprint for future discussions with Congress. The legislative process may take significant time as the proposed changes affect a multitude of Internal Revenue Code provisions, and members of Congress may not support the precise proposals made by the Administration. Thus, whether these proposals are ultimately enacted into law, how they may be modified, and when they will be effective, cannot be known.

Follow the links below to read about the provisions.


 

Federal Tax Proposals


International Tax Proposals

 

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Branding Webinar Featuring Skoda Minotti Marketing Services

Join us on March 18th at 11 a.m. for a free webinar on branding and its importance to business. Jonathan Ebenstein, Managing Director, Skoda Minotti Marketing Services, will cover the following: Benefits of a Strong Brand, Why Invest in a Strong Brand, Internal and External Branding Initiatives, Branding Case Study.

Presented by Smart Business Cleveland -
Click here to Register
Thursday, March 18
11:00 a.m.

Employment Tax National Research Project

This month, the IRS with little official fanfare and no real advance warning, will begin a "national research project" to study (1) payroll taxes, (2) fringe benefits, (3) independent contractors, (4) expense reibursements and (5) other related "payroll" issues.

To learn how this audit initiative may affect your business,
click here.


Skoda Minotti Planning Seminars

In the coming months, we will be hosting free college planning seminars (great for current high school freshmen, sophomores or juniors) on a monthly basis. We invite you to join us at one of the events listed below. All events will be hosted at our offices. Click the link to register.
 


Working at a Downsized Company - How to Keep your Morale High
Thoughts from Coach Bob - By Bob Barkett, CPA

The 2009 economy experience left many companies with no choice but to downsize the workforce. Justification was easy - reduce costs or go out of business. Let's say, however, that you were one of the "fortunate" ones to keep your job. Shortly after the brief celebration, you realize that now you wear two or more job hats. Some of the responsibilities are strange yet the expectations are greater than ever. You find that you can't get the job done in the "normal" eight hour day and evenings and/or Saturdays become the new norm. That easy disposition everyone liked about you isn't there anymore and the home life, what little there is, isn't much fun. The kids ask why you aren't around much and your spouse seems upset most of the time. Hopefully, the picture isn't this bad, but the question remains, "How do you keep your morale high in a downsized situation?"

You call Coach Bob and he asks you to think about the following:
Click here to read more.

Looking to the Future of the Real Estate and Construction Industry
Published in the January 2010 issue of Builders Exchange Magazine

In 2009, the Real Estate and Construction Group at Skoda Minotti once again conducted its annual survey of the real estate and construction industries in
Northeast Ohio. The survey results were gathered in May of 2009. The survey was conducted via e-mail and was sent out to Northeast Ohio real estate and construction professionals, including the local membership of several construction and real estate trade associations. The construction industry survey further strengthens the major trends that we saw in the 2008 survey: there is a lack of work and the work that is available is bid extremely competitively.

Click here to read the complete article.


Aurum Capital Markets Summary

Please click here for a summary from Aurum Wealth Management on the performance of the major market indices through the end of January as well as a recap of the significant events influencing the markets.

Employee Handbook Service

We would like to make you aware of a unique and innovative service offering from Employers Resource Council. ERC now offers an Employee Handbook Service that will allow ERC members to easily create an employee handbook that is easy to complete, customized, legally compliant and affordable.

Click here to learn more.

Business Valuation & Litigation Support E-Newsletter: February 2010

Friday, February 19, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

Constructing a Claim for Lost Productivity Damages           

Quantifying the cost of lost productivity when a construction project is disrupted through no fault of the contractor is a difficult challenge. An unanticipated disruption of the project typically causes the contractor to work less efficiently, which can lead to additional labor, equipment and material costs. This article explains that appraisers can use several methods when quantifying lost productivity damages, depending on the particular job’s facts and circumstances and also notes that lawyers and damages experts need to work together closely to establish lost productivity and measure it appropriately.

Click here to read this article.

Marketability discounts: Appraisers relying less on empirical study averages 

With the widespread availability of public market databases, spreadsheet software and other analytical tools, valuators are no longer relying solely on empirical study averages to determine marketability discounts. They’re now placing greater emphasis on how to identify what truly affects marketability and how to better match empirical data to the specific attributes of each subject company. However, though pre-IPO and restricted stock studies may be somewhat under siege, their data is still worthwhile. Research has generated several insightful hypotheses.     

Click here to read this article.

Clues abound: The tax return as an investigative tool

Tax returns can be a highly effective investigative tool in fraud and divorce cases, shareholder litigation, and other situations in which a defendant may have hidden assets. In fact, virtually every page of a tax return can provide clues to hidden assets. Income from wages, taxable refunds of state or local taxes, and retirement plan distributions are just a few of the items on a 1040 that a valuator will review.
 
Click here to read this article.

Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.

Lessons Learned from the Real Estate Industry

Wednesday, February 3, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

In the fourth quarter or 2009, Northeast Ohio saw a decrease in vacancy rates and an increase in net absorption, indicating that things may be turning around. When the economy will fully recover, though, has yet to be determined with certainty, and real estate companies are still suffering from various challenges including the absence of credit and the economic loss in the value of underlying real properties. Companies can adapt to these challenges and survive in this market, though; click here to learn more.

For more information, post a comment below or contact our Real Estate and Construction Group at 440-449-6800.
 

Real Estate Tax Reminder: Valuations Must be Contested by March 31

Tuesday, January 26, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

With the recent declines in the real estate market, it is important that you ensure your commercial property is valued correctly for real estate tax purposes. In 2009, many Ohio counties reappraised or updated their real property values for the tax year. These new valuations apply through 2012.

Despite the declining real estate market, it is our understanding that most tax values for commercial properties were not lowered for the 2009-2011 tax years in many Ohio counties. Owners of commercial property have until March 31, 2010 to contest the new valuations.

If you own high value properties (office; industrial; apartments) we encourage you to review these updated tax values. We would be glad to discuss with you if a challenge makes sense and also refer you to legal professionals who are equipped to handle these matters.

Please contact our Litigation Advisory Services Group at 440-449-6800 if you have any questions regarding this matter.
 

Business Valuation & Litigation Support E-Newsletter: January 2010

Thursday, January 21, 2010 by Bob Ranallo, CPA/ABV, JD, CVA, CFF

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

  • Finding the Appropriate Valuation Standard
  • How Valuators Assess the Rising Risk of Fraud
  • Lost Profits or Lost Value?

Finding the Appropriate Valuation Standard           

Valuation isn't static and can change depending on the purpose of the valuation. This article looks at the three most common standards of value: fair market, investment and fair. It briefly defines each standard and discusses the circumstances in which one standard may be more appropriate than another. The article points out that identifying the appropriate valuation standard up front can minimize confusion down the road. The goal is to arrive at a reasonable and supportable value conclusion in light of all the surrounding facts and circumstances.

Click here to read this article.

 
How Valuators Assess the Rising Risk of Fraud

The current economic downturn has produced an upswing in incidents of occupational fraud, so it's imperative for businesses to step up efforts to deter and detect it. An important part of the valuation process is identifying potential risks and gauging whether management has taken appropriate action to mitigate those risks. This article explains how valuators evaluate internal controls and corporate culture, tailoring their analyses of fraud risks based on the subject company's size, complexity, industry and goals.    

Click here to read this article.
 

Lost Profits or Lost Value?

Lost profits and lost business value are common measures of damages in commercial litigation. They're also a common source of confusion. What do they have in common? How are they different? Can a plaintiff recover both? This article addresses these questions. A basic understanding of the similarities and differences between lost profits and lost business value can help build a case for business damages or challenge an opponent's calculations.

Click here to read this article.


Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.