Top Issues in Business Valuation: Expert Discuss Topics Ranging from Changes in Fair Value Measurements to the Retirement of the Baby Boomer Generation
EXECUTIVE SUMMARY * Clients want practitioners to be more than just valuation services providers. They want someone who can be more of an adviser and consult with them on ways to create value. * Practitioners are keeping an eye on the currant proposal on fair value accounting for private companies, The proposal could impact the amount of business valuation work that is available. * Baby Boomer business owners are or will soon be looking to liquidate their nest egg. That presents a great business development opportunity to the business valuation community. * Even though technology is transforming the way many CPAs operate, some accountants, lawyers, and clients are sticking to the old ways of doing things. Business valuation practitioners need to be prepared to work with both types of colleagues and clients. ********** Business valuation experts have been practicing in an evolving landscape for the past several years. New standards, changing technology, and an aging population are all playing a part in effecting changes. The JofA organized a round-table discussion of the important issues affecting CPAs who advise clients on business valuation matters. The participants discussed issues such as the effect of the AICPA's new Financial Reporting Framework for Small-and Medium-Sized Entities (FRF for SMEs) on fair value determinations, the opportunity presented by the potential demand for valuation services as Baby Boomer business owners near retirement, and the need for valuation practitioners to take on a broader advisory role. Participating in the round table were: * Rosanne Aumiller, CPA/ABV/CFE a director at BBP Partners. * Randie Dial, CPA/ABV/CFF, a partner with CliftonLarsonAllen. * Nathan DiNatale, CPA/ABV, a senior manager at SC&H Group. The following is an edited transcript of the discussion: What are the emerging trends that you' re seeing in business development right now? Dial: I'm seeing clients wanting more than you just being a valuation guy They want someone that's going to come in and be more of an adviser and maybe consult with them on ways to create value. The other big area that I'm seeing is more and more industry specialization in a lot of the proposals I get. Clients and prospects want more and more expertise within certain industries. An example would be financial institutions. If you have not done a financial institution engagement, you're not likely going to get that engagement. DiNatale: I see the same thing out there with respect to industry specialization. In addition, I frequently see clients that are referred for valuation work where, upon talking to the client, it's not really valuation they are looking for. Rather, it's how can they prepare themselves to potentially sell the company? While they are thinking valuation, what they really need is advisory services. I end up referring them to our capital practice that helps them on an advisory side [with valuation calculations] as opposed to just performing a full blown SSVS1 [Statement on Standards for Valuation Services No. 1] report. What are the latest developments and challenges with fair value measurements? DiNatale: I think the most current item facing fair value measurements is how the AICPA Financial Reporting Framework for the Small- and Medium-Sized Entities is going to affect our work moving forward. From a fair value perspective, talking about purchase price allocations and goodwill, I've seen quite a roller coaster ride over the past years, probably five or six years, where it was real heightened up until the decline in 2008 and 2009 where we were getting hammered with goodwill impairments. Then we hit a lull after that where we were not [getting] any new work as it relates to that [goodwill impairments], and it has kind of slowly crept back up. I also think the introduction of the [FRF for SMEs] will be another challenge to get past for those of us dealing in fair value. …