Autumn 2018


Thought Leadership in Valuation for Fair Value Measurement Purposes

Editor for This Issue: Terry G. Whitehead, CPA

Fair Value Reporting Thought Leadership

Thought Leadership Discussion:
The Valuation and Reporting of Contingent Consideration in Business Combinations
Charles A. Wilhoite, CPA, and Lisa H. Tran
Various forms of contingent consideration may be included in the pricing of merger and acquisition transactions. The contingent consideration structure often bridges the gap between the buyer’s and the seller’s expectation of the target company value in the transaction negotiation process. Due to the increasingly complex structure of such contingent consideration arrangements, it may be necessary for the corporate acquirer to retain a valuation analyst to estimate the fair value of the transaction contingent consideration for GAAP accounting compliance purposes.

Overview of Fair Value Considerations in Business Combinations and Bargain Purchase Transactions
John C. Kirkland and F. Dean Driskell III, CPA
This discussion summarizes the fair value measurement guidance and financial accounting considerations in business combinations—and specifically in bargain purchase transactions. This discussion describes the principles of acquisition accounting as they relate to fair value measurement. And, this discussion describes many of the valuation analyst considerations with regard to the fair value measurement for a bargain purchase transaction.

Accounting Standards Updates in Business Combinations and Goodwill Impairment
Terry G. Whitehead, CPA
The Financial Accounting Standards Board (“FASB”) regularly issues updates and modifications to U.S. generally accepted accounting principles. During 2017, the FASB promulgated two significant Accounting Standards Updates (“ASUs”). These ASUs affect the estimation of fair value measurement for financial accounting purposes. It is important for valuation analysts to be aware of such updates in order to provide fair value measurement valuation services.

Fair Value Measurement Thought Leadership

The Market Participant Acquisition Premium for Fair Value Measurement
Timothy J. Meinhart
An ownership control premium is commonly applied when valuing controlling ownership interests in business enterprises for financial accounting purposes. However, there is a diversity of practice among valuation analysts (“analysts”) about how control premiums are measured and applied in fair value measurements. In an effort to develop best practices in the area of control premiums, the Appraisal Foundation issued Valuations in Financial Reporting Valuation Advisory #3: The Measurement and Application of Market Participant Acquisition Premiums (“VFR Advisory #3”). VFR Advisory #3 outlines the factors that analysts should consider when measuring and applying ownership control premiums in fair value measurements.

FASB Accounting Standards Update Simplifies the Accounting for All Share-Based Payment Awards
Thomas M. Eichenblatt
This discussion provides a review of the recent changes to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) topic 718—Stock Compensation. Specifically, this discussion describes (1) the main changes to the ASC topic 718, (2) the context of these changes, and (3) why these changes were made.

Fair Value Valuation of Identifiable Intangible Assets in the Acquisition Accounting of a Business Combination
Robert F. Reilly, CPA
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) topic 805 provides U.S. generally accepted accounting principles (“GAAP”) guidance with regard to the acquisition accounting for business combinations. One important consideration within the application of acquisition accounting is the fair value valuation of the acquired identifiable intangible assets. This discussion provides practical guidance with regard to the recognition of—and the fair value valuation of—identifiable intangible assets within the context of a business combination. This discussion provides illustrative examples of the fair value valuation of several identifiable intangible assets. And, this discussion provides valuation analyst caveats with regard to the development of, the work paper documentation of, and the valuation reporting for acquisition accounting fair value valuations.

Valuation Professional Credentials Thought Leadership

Best Practices Discussion:
The Certified in Entity and Intangible Valuations Credential and the Mandatory Performance Framework

Terry G. Whitehead, CPA
Fair value measurement is an important valuation-related issue which, in recent years, has received increased attention regarding the measurement, presentation, and disclosure for financial accounting purposes. In an effort to enhance the consistency and transparency in the fair value measurement process, the Certified in Entity and Intangible Valuations (“CEIV”) professional credential was established. An important education and training component for the CEIV credential is the Mandatory Performance Framework (“MPF”). The MPF is a practical, nonauthoritative guide which identifies and establishes appropriate engagement process and documentation guidelines for valuation analysts who prepare valuations for financial accounting purposes.

Accredited in Business Valuation Credential Now Open to Non-CPA Professionals
Nathan P. Novak
On May 22, 2018, the American Institute of Certified Public Accountants (“AICPA”) opened its Accredited in Business Valuation (“ABV”) professional credential to individuals who are not certified public accountants (“CPAs”). Historically, the ABV credential was reserved specifically for CPA members of the AICPA. The previous CPA requirement limited the access for the well-known valuation credential to a subset of business valuation practitioners. This discussion provides an overview of (1) the ABV credential and (2) the implications of the AICPA amendment to the valuation profession.