1. Standards of Business Valuation.
Sources for Defining Value.
Definitions of Value.
Premise of Value.
2. Subsequent Events.
3. Business Valuation Experts.
Proving Business Value.
The Expert Appraiser.
Types of Experts.
Various Roles of Experts.
Business Valuation Litigation Witnesses.
Admissibility of Evidence Underlying Expert Opinions.
Limitations to Admissibility.
Reliability of the Expert.
Minimum Thresholds for the Business Valuation Expert.
Sarbanes-Oxley Act of 2002.
Attorney Assistance to the Expert.
Concerns about Expert Testimony.
Appendix: Expert Credentials and Qualifications.
4. Sources of Law and Choice of Courts.
Structure of the American Legal System.
5. Burden of Proof in Valuation Controversies.
Burden of Proof.
Who Bears the Burden of Proof.
Burden of Proof: Exceptions to the General Rule.
6. Penalties and Sanctions.
What You Need to Know.
7. Valuation and Choice of Entity.
Limited Liability Companies.
Choice of Jurisdiction.
8. Valuation of S Corporations and Other Pass-Through Tax Entities: Minority and Controlling Interests.
Case Law Background.
S Corporation Minority Interest Appraisals.
Comparison of Minority Interest TheoriesA Summary of the Issues.
S Corporation Controlling Interest Appraisals.
S Corporation Valuation IssuesPartial Bibliography.
9. Valuation of International Transactions.
10. Adjustments to Financial Statements.
Separating Nonoperating Items from Operating Items.
Addressing Excess Assets and Asset Deficiencies.
Handling Contingent Assets and Liabilities.
Adjusting Cash-Basis Statements to Accrual-Basis Statements.
11. Comparative Financial Statement Analysis.
Comparable Ratio Analysis.
Common Size Statements.
Tying the Financial Statement Analysis to the Value Conclusion.
12. Economic and Industry Analysis.
Objective of Economic and Industry Analysis.
National Economic Analysis.
Regional and Local Economic Analysis.
Partial Bibliography of Sources for Economic and Industry Analysis.
13. Site Visits and Interviews.
Interviews with Persons Outside the Company.
14. The Income Approach.
Summary of Approaches, Methods and Procedures.
Introduction to the Income Approach.
Net Cash Flow: The Preferred Measure of Economic Benefit in the Income Approach.
Discounting versus Capitalizing.
Relationship between Discount Rate and Capitalization Rate.
Projected Amounts of Expected Returns.
Developing Discount and Capitalization Rates for Equity Returns.
Weighted Average Cost of Capital (WACC).
The Midyear Convention.
The Income Approach in the Courts.
Appendix: An Illustration of the Income Approach to Valuation.
15. The Market Approach.
The Market Approach.
Revenue Ruling 59-60 Emphasizes Market Approach.
The Guideline Publicly Traded Company and the Guideline Transaction (Merger and Acquisition) Method.
How Many Guideline Companies?
Selection of Guideline Companies.
Documenting the Search for Guideline Companies.
Choosing Multiples Based on Objective Empirical Evidence.
What Prices to Use in the Numerators of the Market Valuation Multiples.
Choosing the Level of the Valuation Multiple.
Selecting Which Valuation Multiples to Use.
Assigning Weights to Various Market Multiples.
Sample Market Valuation Approach Tables.
Other Methods Classified under the Market Approach.
Appendix: An Illustration of the Market Approach to Valuation.
16. The Asset-Based Approach.
The Adjusted Net Asset Value Method.
Excess Earnings Method (The Formula Approach).
17. Entity-Level Discounts.
Trapped-In Capital Gains Discount.
Key Person Discount.
Portfolio (Nonhomogeneous Assets) Discount.
Discount for Contingent Liabilities.
18. Discounts for Lack of Marketability.
Summary: General Introduction to Shareholder-Level Discounts and Premiums.
Definition of Marketability.
Benchmark for Marketability Is Cash in Three Days.
Investors Cherish Liquidity, Abhor Illiquidity.
Degrees of Marketability or Lack Thereof.
Empirical Evidence to Quantify Discounts for Lack of Marketability: The Restricted Stock Studies.
Empirical Evidence to Quantify Discounts for Lack of Marketability: Pre-IPO Studies.
Criticisms of the Pre-IPO Studies.
Factors Affecting the Magnitude of Discounts for Lack of Marketability.
Use of the Databases for Quantifying Discounts for Lack of Marketability.
Discounts for Lack of Marketability in the Courts.
Partial Bibliography of Sources for Discounts for Lack of Marketability.
19. Other Shareholder-Level Discounts.
Minority Discounts/Control Premiums.
Voting versus Nonvoting Shares.
Discounts for Undivided Fractional Interests in Property.
20. Weighting of Approaches.
Theory and Practice.
Mathematical versus Subjective Weighting.
Examples of Weighting of Approaches.
21. Valuation of Options.
Introduction and Background.
General Principles of Option Valuation.
Specific Rules for Valuing Options.
22. IRS Positions.
Rev. Rul. 59-60.
Rev. Rul. 65-192.
Rev. Rul. 65-193.
Rev. Proc. 66-49.
Rev. Rul. 68-609.
Rev. Proc. 77-12.
Rev. Rul. 77-287.
Rev. Rul. 83-120.
Rev. Rul. 85-75.
Rev. Rul. 93-12.
Tax Advice Memorandum 1994-36-005.
Rev. Proc. 2003-51.
23. Business Appraisal Reports.
Business Valuation Report-Writing Standards.
Elements of the Business Valuation Report.
Organization of the Report.
Qualities of a Good Appraisal Report.
24. Questions to Ask Business Valuation Experts.
Financial Statement Adjustments and Analysis.
Economic and Industry Data.
Site Visits and Interviews.
General Questions about Methodology.
Discount and Capitalization Rates in the Income Approach.
Projections Used in the Income Approach.
Minority Interest Discounts/Control Premiums.
Discounts for Lack of Marketability.
Questions about Contradictory Prior Testimony.
Appendix A: IRS Business Valuation Guidelines.
Appendix B: International Glossary of Business Valuation Terms.
Appendix C: Bibliography.
Appendix D: Table of Cases.