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FVG's E-Newsletter on tax cases concerning business valuations and related issues
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- Royalty Rates
- Thousands of Transactions
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and NAICS Codes
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Managing Directors
Terry J. Allen
Midwest
Stephen J. Bravo
Boston, MA
Michael
A. Crain
Ft. Lauderdale, FL
John R. Gilbert
Great Falls, MT
James
R. Hitchner
Atlanta, GA
Steven D. Hyden
Tampa, FL
Robert Lanz
Silicon Valley, CA
Michael J. Mard
Tampa, FL
Michael J. Mattson
Chicago, IL
John J. Mayerhofer
Oakland, CA
Ralph
Ostermueller
St. Louis, MO
Charles H. Preston
Los Angeles, CA
James S. Rigby
Los Angeles, CA
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Founding Member
Financial
Consulting
Group, L.C.
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Fair
Value Measurement
Fair
Value is measured:
- Using the
definition: “The fair value of an asset (or
liability) is the amount at which that asset (or
liability) could be bought (or incurred) or sold
(or settled) in a current transaction between
willing parties, that is, other than in a forced
or liquidation sale“.
Thus, the fair value of a reporting unit
refers to the amount at which the unit as a whole
would be bought or sold in a current transaction
between willing parties.
- Using quoted market
prices in active markets, if available
o
Market capitalization of a reporting
unit using quoted process
may not be representative of the fair value of the
reporting unit
as a whole.
o
Therefore, is not the sole measurement
basis of the fair value
of a reporting unit.
- Using the best
information available, if quoted prices are not
available.
- Using a present value
technique, which is often the best available
technique.
o
Cash flow assumptions must incorporate
assumptions that marketplace
participants would use in their estimates of fair
value.
o
If that information is not readily
available without undue cost and effect,
entity may use its own assumptions.
o
Assumptions must be reasonable and
supportable assumptions
considering all available evidence.
o
Should consider the essential elements
of a present value measurement as
stated in Concepts Statement 7.
- Using a valuation
technique based on multiples of earnings, revenue or
similar performance measures if consistent with the
objective of measuring fair value.
o
Use of multiples would not be
appropriate in situations in which the
operations or activities of an entity for which the
multiples are known are
not of comparable nature, scope, or size as the
reporting unit for which fair
value is being estimated.
See Paragraph(s) 23 - 25 of SFAS 142.
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