Business Valuation and Litigation Support

Business valuation services are performed because ownership interests in privately held companies often represent a significant portion of one’s estate and/or portfolio. The value, or worth, of an interest in a privately held company, as opposed to stock in a public company, is usually unknown because there is no active market to sell or trade that interest from which to ascertain or approximate a value. Value determinations are most commonly needed to calculate estate tax upon death, split up family assets in a divorce, or negotiate value in a purchase, sale, or merger of a business enterprise. Besides these, there are many other reasons why a holder of an interest in a privately held company might require a business valuation. Valuations are performed to determine company or stock value for:

• Bankruptcy
• Buy/Sell Agreements
• Charitable Contributions
• Cohabitation Agreements
• Damages for Disruption of a Business
• Dissenting Shareholder Actions
• Estate Tax Planning
• Family Limited Partnerships
• Gifts Programs & Gift Taxes
• Marital Dissolution
• Partner Disputes & Split-ups
• Prenuptial Agreements
• Purchase, Sale, or Merger of a Business
• Succession/Exit Planning
• Venture Capital & other forms of Financing

Valuation Standards have Changed

Effective January 1, 2008 the American Institute of Certified Public Accountants ("AICPA") adopted Statements on Standards for Valuation Services, which apply to all licensed CPAs in the practice of public accounting in Washington State.  In addition, the National Association of Certified Valuators and Analysts ("NACVA") revised their Standards January 1, 2008 to compliment AICPA Standards and again in 2010 for engagements entered into after June 1, 2011.

Our valuation analysts strive to stay current on these changes to ensure that your valuation complies with all professional development and reporting standards.  In addition, we actively participate with the AICPA and NAVCA when proposed changes are made to valuation standards and provide "real world" insights to the standard setting committees.   Our comments have been reflected in "draft Standards" proposed by NACVA in 2010 and "Q&As" on business valuation practice issues posted by the AICPA on their website October 2011.

Our Valuation Team

The valuation consultants at Southard, Beckham, Atwater & Berry, CPA PS utilize comprehensive approaches to valuing business interests, family limited partnerships, and retirement plan annuities. R. Christopher Beckham, CPA  has performed valuation services for over 30 years.  Christopher T. Mutchler, CPA, CVA, CFE has been involved in the preparation of business valuations for nearly ten years and earned the accreditation of Certified Valuation Analyst (CVA) in 2006.

Our business valuation consultants provide the level of service you require, ranging from informational “calculation reports” to comprehensive detailed valuation reports. We will assist you in determining which of the valuation service is appropriate for your situation:

I. Detailed Report

This comprehensive, narrative report expresses an independent conclusion of value of a business interest. The report provides a logical progression and clearly communicates pertinent information, valuation methods, and conclusions. The result is an accurate, easy-to-understand and defendable report on the value of your business.

For income tax purposes, certain transactions may require determining the fair value of stock in a closely held business to accurately assess tax liability that can help avoid overpayment or underpayment of taxes. Business Valuation Guidelines were revised July 1, 2006 and published in the Internal Revenue Manual for all IRS employees who review (audit) formal valuation reports prepared by others. The Guidelines are essentially an “audit program” which outlines procedures and forms of analysis to ascertain the appropriateness of formal valuations used for federal tax purposes.

If you need a formal valuation report, you need to be confident the analyst you hire has the expertise and credentials to perform a defendable valuation that may be challenged by the Internal Revenue Service. The business valuation professionals at Southard, Beckham, Atwater and Berry, CPA, PS possess the experience, knowledge of valuation techniques and credentials to give you the confidence that your valuation will be done right the first time.

II. Summary Report

If the report is for internal client use only, we can issue a summary report that states the material factors leading to the report’s conclusions. Summary reports generally involve the same in-depth analysis as detailed valuation reports, however much of the content required in a detailed valuation is omitted from a summary report to reduce costs.

A summary report would not be appropriate if a valuation is expected to be used in litigation or filed with an estate or gift tax return.  If a third party challenges the value conclusion in a summary report, we can use additional work-file information to produce a corresponding detailed valuation report.

III. Calculation Reports

Effective January 1, 2008 new Reporting Standards specified minimum reporting content to be included in calculation reports (formally referred to as "calculations of value").

"Calculation engagements" provide an approximate indication of value.  Limited procedures are agreed to in advance with the client. This type of engagement is appropriate when a client wants an estimate of business value, but does not require a formal opinion (i.e. conclusion of value).

IV. Litigation Support

In addition to preparing written valuation reports, our valuation professionals offer the experience and credentials to provide trial preparation assistance, expert testimony and review of other expert reports.

The IRS Toughens Penalties for Business Appraisers

The Pension Protection Act of 2006 added new rules that apply to qualified appraisals (valuations) including who can perform them, and new accuracy-related penalties. Who is a “qualified appraiser” is now defined by Statute. In general, under prior law Reg. Sec. 1.170A-13(c)(5) allowed an appraisal if the appraiser held himself out as an appraiser or regularly performed appraisals; had some subjectively adequate credentials, knew about the civil fraud penalties and was not a disqualified person.

Now, the appraiser needs either “an appraisal designation from a recognized appraiser organization” or has met “minimum education and experience requirement” established by the Secretary. New credential requirements are complemented by penalty provisions set forth in new Code Section 6695A. Valuation penalties have also been strengthened. Under Code Section 6662(e), a substantial valuation misstatement for income tax penalty purposes is 150% of the correct valuation, reduced from 200%. A gross valuation misstatement is now 200% of the correct value, down from 400%.

Why Southard, Beckham, Atwater & Berry, CPA, PS?

We believe that when it comes to business valuation services, not all firms are alike. It is a specialized field where a consultant’s professional certifications, time spent performing valuations, and commitment to continuing education makes us the firm of choice when it comes to your business valuation needs.