Financial Valuation: Applications and Models
Financial Valuation Workbook
Although many substantial books on theories of business valuation (BV) are available, the need for guidance on the practical application of BV standards is ongoing. Financial Valuation: Applications and Models (“Financial Valuation”) and its companion, Financial Valuation Workbook (“workbook”), make an outstanding contribution to BV practice guidance.
In Financial Valuation James R. Hitchner, CPA/ABV, has assembled a text that obtains accord among 25 highly regarded practitioners in the valuation profession about how best to convey BV theories and apply them to a broad range of financial valuation situations. Many of the contributors hold multiple designations or certifications from recognized organizations; 22 are CPAs and 20 hold the AICPA’s ABV credential.
Financial Valuation is well-organized and lucidly written, and it contains abundant best-practices examples and models that bring the valuation theories and concepts to life. It includes many strategically placed tips (ValTips) summarizing or highlighting key points that ABVs need to know. While it will prove immediately useful to an experienced BV practitioner, this book will help even those relatively new to valuation to put the guidance into practice.
Michael J. Mard, CPA/ABV, who was recently appointed to the Valuation Resource Group of the Financial Accounting Standards Board (FASB), is Hitchner’s coauthor for the workbook, which provides well-conceived exercises, more than 100 pages of checklists for both general and special purposes and other useful tools. It also contains all the ValTips in one chapter for easy reference. The workbook is an excellent training guide, taking readers step-by-step through the valuation process. Experienced practitioners will find it useful as a refresher and a supplement to Financial Valuation.
COMPREHENSIVE, IN-DEPTH GUIDANCE
Financial Valuation and the workbook provide in-depth analyses of various positions regarding the tax impact on the earnings of S corporations, valuation discounts and premiums, and the handling of nonoperating or excess assets in valuing minority interests, among other frequently debated technical topics. Chapters in Financial Valuation are devoted to explaining the valuation of intangible assets; business or commercial damages; estate, gift and income tax valuations; family limited partnerships; employee stock ownership plans; shareholder disputes; divorce-related valuations; valuations of professional practices; valuations of health care service businesses; and various other types of engagements. Addenda in the text explain the process of valuing real estate and machinery and equipment.
Financial Valuation also covers important subjects such as Internet searches and managing and marketing a valuation practice—areas not typically included in other such texts. The book also discusses specialized and emerging valuation areas and gives advice on handling difficult situations. Chapter 24 presents guidance on tax and civil court cases, with summaries and detailed explanations of their significance, cross-referenced by topic. The case discussions provide insights into what arguments the courts found persuasive.
A lthough Financial Valuation identifies the key valuation procedures early in the text and describes the process of gathering information about a subject company, its industry and the economy, the book introduces the concept of macroenvironmental analysis (that is, information pertaining to other risks such as technological and political ones) more than midway through. This is a useful framework that could have been introduced earlier. Readers also should take note of an addendum called “Valuation Information Request List,” a checklist for collecting background information about a subject company. While it is very good, for the most part it’s not as comprehensive as checklist 5-3 in the workbook, “Valuation Information Request.” Users might find it helpful to refer to both.
Nevertheless, Financial Valuation and the workbook do so many things so well that practitioners at all levels seeking guidance in the application of business valuation theories will not be disappointed.
JAMES FELDMAN, CPA/ABV, is the AICPA manager of business valuation and forensic and litigation services. His views, as expressed in this article, do not necessarily reflect the views of the Institute. Official positions are determined through certain specific committee procedures, due process and deliberation.