Posts Tagged ‘amber hoover’

Valuation Analyst Credentials

Amber HooverBy Amber Hoover, CPA/ABV
Senior Analyst, Valuation and Litigation Services 

When you need a valuation of a business, the first step is also the most important: hiring an expert.

Using an in-house accountant or relying on the do-it-yourself method can often make an uncertain situation into an even worse one. It’s important to find someone who has experience and knowledge in valuation so you can arrive at a result that is not only fair, but legally justified.

The Internal Revenue Service (IRS) and the U.S. legal system both have guidelines for what constitutes a “qualified” valuation expert. These guidelines describe the experience, training and continuing education necessary to earn this designation.

There are a number of credentials available that denote valuation expertise, which have undergone some changes in recent years. These include:

Organization Certification Membership
 
American Institute of Certified Public Accountants (AICPA) Accredited in Business Valuation (ABV) Certified Public Accountants (CPA)s
 
American Society of Appraisers (ASA) Accredited Senior Appraiser (ASA)

Accredited Member (AM)

CPAs and Non-CPAs
 
National Association of Certified Valuators and Analysts (NACVA) Certified Valuation Analyst (CVA)

Accredited in Business Appraisal Review (ABAR)

CPAs and Other Credential Holders
 
Institute of Business Appraisers (IBA) Certified Business Appraiser (CBA)

Master Certified Business Appraiser (MCBA)

*

*Credential holders must comply with the same recertification requirements as NACVA’s credential holders.

In 2008 the NACVA acquired the assets of the Institute of Business Appraisers, but that organization was subsequently dissolved. The CBA and MCBA credentials are no longer available to obtain, but current holders of these credentials must still comply with NACVA’s recertification requirements.

Valuation analysists who have been credentialed through these organizations have been through training that provides the knowledge and skills needed for valuing a business and the required standards to follow. Continuing education requirements allow members to keep current on trends and issues in the valuation world.

When you’re considering an engagement with a valuation analyst, don’t be afraid to inquire about their credentials and experience with various types of businesses. An analyst who has expertise in one particular type of valuation may not necessarily be the person best suited for your needs.

If you are unsure what type of valuation expertise you require, please call Amber Hoover at (317) 613-7844 or email ahoover@sponselcpagroup.com.

Employee spotlight: Amber Hoover

Amber HooverAmber Hoover is another one of the firm’s “first day” employees, joining the company upon its founding in 2009. She graduated from Indiana University Kelley School of Business in Indianapolis, and soon found her calling in financial analysis and valuation. She is both a CPA and holder of an Accredited in Business Valuation (ABV) certification.

Now a Senior Valuation Analyst in the Valuation and Litigation Services department, Amber performs many different varieties of valuations, focusing mostly on privately held businesses, and also specializes in fraud investigation, lost profit analysis, forensic accounting and economic damage analysis.

Amber has been married to Andy Hoover for six years, and they have an energetic 1-year-old boy, Miles, who will be joined by a baby sister in the very near future. Amber also volunteers with Food Rescue, a charitable group that distributes food to those in need, serving as their treasurer and member of the board of directors.

Where Is the Employment Market Headed?

Amber HooverBy Amber Hoover, CPA/ABV
Senior Analyst, Valuation and Litigation Services

Want to know where the employment market is heading? Know a new or upcoming college graduate and want to give them some useful career advice for now and down the road?

IBISWorld, a global business intelligence leader specializing in industry market research and procurement and purchasing research reports, has assembled a list of industries showing strong employment growth in 2017. And they also have put together a rundown of the top five distressed industries.

Below are the industries that IBIS has identified with the greatest capacity to hire the largest share of new college graduates:

Industry 2017 Employment Growth Rate 2017

Wage growth rate

College Majors 2017 average industry wage
 
Internet Publishing & Broadcasting 10.3% 10.9% Computer Engineering, Computer Science, Communications $82,069
Geophysical Services 7.7% 9.4% Geology, Environmental Engineering $58,569
Elderly & Disabled Services 7.3% 5.9% Nursing, Hospitality $19,338
Financial Planning & Advice 6.0% 6.9% Accounting, Financial Mathematics, Economics $82,180
Language Instruction 6.0% 6.7% Humanities, Communications, Education $18,804

IBISWorld has listed the following industries as distressed, measured by the quickest expected industry value added (IVA),which measures the industry’s contribution to the U.S. economy, curated using IBISWorld’s proprietary database, declines between 2012 and 2017.

DVD, Game and Video Rental

  • Projected annualized IVA decline: (15.8%)
  • Attributing factor: increase reliance on digital outlets such as Netflix, Hulu, Amazon and Comcast.

Gold & Silver Ore Mining

  • Projected annualized IVA decline: (16.5%)
  • Attributing factor: financial markets have rebounded over the past five years; therefore, investors have decreased their need to buy assets such as gold and silver.

Cotton Farming

  • Projected annualized IVA decline: (12.5%)
  • Attributing factors: unfavorable exchange rates and overseas competition.

Camera Stores

  • Projected annualized IVA decline: (7.9%)
  • Attributing factor: competition from online retailers, department stores and consumer electronic stores.

Database & Directory Publishing

  • Projected annualized IVA decline: (10%)
  • Attributing factor: competition from online search engines such as Google.

If you have any questions, please call Amber Hoover at (317) 613-7844 or email ahoover@sponselcpagroup.com.

Are All Values Created the Same?

Amber HooverBy Amber Hoover, CPA/ABV
Senior Analyst, Valuation and Litigation Services

When valuing a business or partial equity interest in one, the valuation analyst relies on a “standard of value” as the definition of the value being determined. The standard of value is typically dependent upon the intended purpose of the valuation, and thus different standards of value may result in different values.

The following is a discussion of the more frequently utilized standards of value and an example of their respective application. This highlights that not “one size fits all” when valuing a business. So careful application of the appropriate standard of value is a critical step in valuation process.

The term Standard of Value is defined by the International Glossary of Business Valuation Terms (the “Glossary”) as: the identification of the type of value being utilized in a specific engagement.

The most popular Standard of Value is Fair Market Value.

Fair Market Value (FMV)

IRS Revenue Ruling 59-60 defines FMV as: The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.

This definition of FMV is most often utilized in valuations for reporting to the Internal Revenue Service (IRS). This definition is also frequently utilized in many other valuation contexts, because of its recognition and acceptance by the IRS as the FMV, Standard of value.

Court decisions on the use of this definition state the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and be well informed about the property and its marketability.

The Glossary defines FMV as: The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.

This definition has been accepted and endorsed in the standards of the following organizations that train and educate valuation analysts: the American Institute of Certified Public Accountants (AICPA), American Society of Appraisers (ASA), National Association of Certified Valuation Analysts (NACVA) and Institute of Business Appraisers (IBA).

Because of the endorsement by these organizations, this definition has become the one frequently applied when valuing a business (or partial ownership) outside of an IRS reporting situation, e.g., a dispute, marital dissolution, merger, acquisition or sale, buy/sell value, etc.

Fair Value (FV)

Fair value differs from FMV and is another frequently utilized standard of value. Fair value is typically defined in the particular context it is being utilized/required. For instance, many states have a statutory definition for Fair Value that is required to be utilized in certain litigation.

Indiana State Statute defines FV with respect to a shareholder dissenter’s shares as: The value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.

Thus in Indiana, in the context of a dissenting shareholder litigation proceeding, FV would be the standard of value that should be utilized.

Another popular venue for FV is in the context of financial reporting. Generally Accepted Accounting Principles (GAAP) require certain assets and liabilities of a business be reported at their fair value.

GAAP defines FV as: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Source: Financial Accounting Standards Board Accounting Standards Codification glossary.

This Standard of Value is used for financial reporting purposes, i.e. the determination of the value of goodwill for impairment analysis.

Investment Value

Investment value is defined by the Glossary as: The value to a particular investor based on individual investment requirements and expectation.

This standard of value is best utilized in a sale, merger or acquisition transaction where a known buyer or seller wants to identify/justify a specific value using a specific set of criteria.

As you can see, these three standards of value have very different definitions. Thus, applying the different definitions should lead to dissimilar results. Knowing which standard applies in a particular situation is critical to obtaining a value for a business or partial ownership interest that is relevant and reliable for the circumstances.

Make sure you utilize a knowledgeable and qualified valuation analyst when you need to value a business. They can help you choose the right standard of value, and thus obtain a value that meets the needs of your situation.

If you have any questions about standards of value, please contact Amber Hoover at (317) 613-7844 or ahoover@sponselcpagroup.com.

Types of Valuation Engagements

Amber HooverBy Amber Hoover, CPA/ABV
Senior Analyst, Valuation and Litigation Services
ahoover@sponselcpagroup.com

One of the issues we commonly address as we begin the valuation process is: What kind of valuation is needed? Does the situation require a definitive value of the company or asset, or will a less detailed analysis suffice?

These two different choices line up nicely with the American Institute of Certified Public Accountants (AICPA) Statement on Standards for Valuation Services (SSVS) guidance on the types of services a Certified Public Accountant (CPA) with an Accredited Business in Valuation (ABV) can offer.  A CPA/ABV can perform either a Valuation Engagement (Comprehensive) or a Calculation Engagement (Limited). The following is a rundown of the differences between the two to assist you in making the right decision for your valuation situation.

The result of a valuation engagement can be expressed as a single amount or a range of value, using one or more of several appropriate valuation approaches and methods.  Using the selected approach(es) and method(s), the valuation analyst prepares the appropriate documentation to support their conclusion, and submits a report. The report can be an oral report, a summary or a detailed report.

A valuation engagement is more thorough than a calculation engagement and therefore requires more time which equates to a higher cost than a calculation engagement.  Valuation engagements are best suited for litigation, such as shareholder or marital dissolutions and regulatory reporting like estate and or gift reporting to the Internal Revenue Service etc.

A calculation engagement is a limited-scope engagement in which the valuation analyst and client agree on the valuation approaches and methods that will be utilized.  The result of a calculation engagement is expressed as a “calculated value”, which again can be a single amount or a range.

In many cases a calculation engagement will exclude certain procedures required to be performed in a valuation engagement.  Excluding these procedures often leads to a calculation engagement having a lower cost than a valuation engagement.  Because of the lower costs, a calculation engagement is often chosen as the valuation service.  Keep in mind that while the results of a calculation engagement are typically a reliable value, because limited work is performed, there must be disclosure in the calculation report that the value could be different had more work been done.  This disclosure requirement of the SSVS often limits the use of a calculation engagement in an adversarial situation.

Here at Sponsel CPA Group we offer a preliminary overview of your client’s financial data before recommending whether a calculation or valuation engagement is warranted.  We offer this in order to prevent the users of our work product from paying for a service that may not be necessary.  And we offer the overview free of charge.

We understand the desire to control professional fees. We want our clients to have confidence in the valuation service we provide and feel comfortable with Sponsel CPA Group as their valuation analysts.

If you have any further questions about the types of valuation reporting available, please contact Amber Hoover at (317) 613-7844 or ahoover@sponselcpagroup.com.

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