Our New Valuation Proposal Request Form Is Here!!
If your business is audited by a firm of certified public accountants [you are then an "attest" client of that firm] recent accounting pronouncements require that acquisitions be accounted by a purchase method, and that the standard - which used to be cost - be Fair Value. There are other instance besides acquisitions where financial statements will be based on the Fair Value standard. Note that the Fair Value standard is completely different from the fair value standard used under states' appraisal statutes to handle shareholder disputes. It is also different from fair market value, which is the standard for tax-based valuation such as gifting, estate and income tax. The accounting-based Fair Value standard is defined by SFAS 157 and is used by companies to comply with various accounting pronouncements such as SFAS 123-R [option-based compensation;] 141-R [Acquisition of a business;] 142 [Impairment of intangible assets;] 144 [Long-lived assets accounting] and others. It is based on the value to a market participant, not the subject, in an orderly transaction, and is thus an "exit" value. It requires seggregation of intangible assets between market-driven, agreement-driven and other specific intangibles [such as customer relationships, in-process R&D, software, supplier relationships, etc.] while the balance of the consideration is simply labelled goodwill. All intangible assets are tested for impairment periodically.
There is now a significant body of knowledge about valuing intangible assets common to most acquisitions and auditors have become comfortable with that body of knowledge. If your accounting firm needs a fair value appraiser to help document an acquisition, please contact J.L. Pierson, ASA to discuss the issues in person or use our Valuation Proposal Request Form. Your accounting firm may also want to call us.
J.L. Pierson, ASA has received specific training on Fair Value valuations, and such is outlined in his professional statement of qualifications. Click here to view JLP's professional statement of qualifications.
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