Business valuation takeaways from recent court cases
Many business valuation cases work their way through the courts each year, but only some of them have a significant impact on the profession. Here are some important excerpts from those cases. 1. Excess earnings method is alive and well. Although the excess earnings method has its critics, it is in use and it stands up in court, especially when valuing small businesses and professional practices. It was the method one party demanded and the court approved in a New York City divorce case that centered on valuing the wife’s dental practice. “The appraiser came in with a price-to-revenue method,”…
U.S. Tax court Judge Laro Discusses Valuation and Expert Testimony Issues
Judge Laro is a U.S. Tax Court Judge and is the author of the seminal Mandelbaum decision. Here is what he had to say at a recent luncheon moderated by 2 valuation experts. Tax Court facts. The moderators asked Judge Laro to situate the Tax Court in the U.S. legal system. The judge obliged and pointed out that there is one Tax Court, in Washington, D.C., that is composed of 19 federal judges, all of whom have their own jurisdiction. Most tax-related cases settle rather than proceed to the U.S. Tax Court. In cases where the parties don’t come to…
Law firms need a better – not bigger – boat
The fate of law firms depends on their ability to recognize that mere growth is not the key to success. This is the conclusion of the “2014 Report on the State of the Legal Market” published by the Center for the Study of the Legal Profession (Georgetown University Law Center) and Thomson Reuters Peer Monitor. Last year was “another flat year for economic growth in U.S. law firms, with continuing sluggish demand growth, persistent challenges of low productivity, ongoing client pushback on rate increases, and a continuing struggle to maintain discipline on expenses,” the report reveals. Major law firms continue…
How to Get Bank Financing For Your Business
With the economy improving, and businesses growing again, cash flow can become an issue. To grow your business, cash flow is important; however increasing cash flow is easier said than done. To find out what it takes to get financing in this current economic climate, I spoke with a local banker. Here’s what he had to say: What do banks look for in financial statements? Prior to the great recession, bankers looked at financial statements to see what collateral the client had. Since the great recession, they look at the balance sheet to see what debt there is against the…
Association of Certified Fraud Examiners Release 2014 Fraud Report
Working with companies who have been victims of fraud on a regular basis, the report provided by the Association of Certified Fraud Examiners for 2014, hits the nail on the head. Here is a summary of their findings: Typical organization loses 5% of revenue each year to fraud. Median loss in their study was $145K. Median duration before being detected was 18 months. Occupational frauds are classified into 3 categories: asset misappropriations, corruption and financial statement fraud. Of these, asset misappropriation was the most common, occurring in 85% of the cases. Tips are consistently the most common detection method. Approximately…
Hard Asset Value Best Captures Worth of Family Business
Because the trial court found neither spouse’s expert offered a convincing valuation for a family business, it opted to adopt the liquidation value the company’s CPA proposed. On appeal, the husband contested both the trial court’s classification of the business as hybrid property as well as its valuation. Who generated increase in value? In 1981, one year before he married, the husband and his father started a business providing motors and pumps for industrial and mining use. The husband was actively involved in running, managing, and staffing the business during the marriage. At the divorce trial, the couple’s daughter testified…