August 2007 Articles
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5. Dual Purpose is de rigueur
The conflict (and resolution) of competing tax and GAAP standards of value. Occasionally, we get asked to opine on the state of our industry and prevailing best practices. We’re in a fairly good position to speak to the issues, being at the crossroads of compliance as we are. For while...
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6. Why the Option Pricing Method trumps the Current Value Method
Understanding Methods of Allocation. The Option Pricing Method has complicated the lives of valuation analysts industry-wide. The Current Value (CV) method has been employed in stock option calculations for many years, both by investors and valuation practitioners. For many years it has been considered the tried-and-true method of value allocation....
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Public Equities and Fair Value
A good friend of mine is an analyst at a large, well-regarded hedge fund. We fell into conversation about the New Dial, and how valuation specifically relating to SFAS 157 is influencing the way publicly traded companies are reporting earnings. My friend subscribes in part to the investment philosophy of...
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The New Dial
Jonathan Weil of Bloomberg wrote today about the implications of Fair Value accounting under SFAS 157, and the possibly misleading results that can be reported under this new standard. It’s a quick read about Wells Fargo’s quarterly earnings statement, well worth your time. In the article, Mr. Weil writes, “Here’s...
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7. Valuation Updates: When and How
Recently we participated in a Fair Value forum with our friends and colleagues in the valuation industry at Frank Rimerman, Grant Thornton, Trenwith, Cogent and others. Among other issues, we discussed the common concerns of our clients relating to 409A/123R valuation practices. Our primary concern was how best to educate...
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A Gem from the AITF Top 25
Noting the absence of authoritative guidance relating to Fair Value accounting, the Appraisal Issues Task Force (AITF) paper from February 2006 highlights a significant issue: a valuation specialist and a financial auditor “may disagree on the appropriate approach to value an asset.” Naturally. However, as the AITF paper points out,...
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AITF Issues Futile Wish List
My partner Alex Hodgkin just returned from the quarterly meeting of The Appraisal Issues Task Force in Chicago. In case you haven’t heard (I hadn’t either), the AITF issued a paper in February 2006 that listed their Top 25 issues they have with FASB’s position on Fair Value for Financial...
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