Do you need a FULL Business Valuation?

By Heather Deskins, CPA/ABV/CFF, CFE, CVA

Attorneys often use Forensic Accountants to prepare business valuations for clients. Clients may need a business valued for gifting purposes, estate planning, executing or implementing a buy-sell agreement, divorce or even to calculate damages. With the current economic conditions we are facing, business owners are being more cautious than ever with their money.

A full blown business valuation can run from $8,000 to upwards of $100,000, depending on the particular issues. For example, if a divorce case spans over five years and the business is to be valued as of the most current date, the report would need updated throughout the period, costing the client a significant amount of money. Are these expenses truly necessary? Well, it depends.

As business valuation and accounting professionals, we are bound by certain professional standards. The professional standards for business valuation services issued by the AICPA and NACVA are very similar in content. These standards outline the reporting and development provisions. In certain cases the reporting provisions are exempt:

A valuation performed for a matter before a court, an arbitrator, a mediator or other facilitator, or a matter in a governmental or administrative proceeding, is exempt from the reporting provisions of this Statement. The reporting exemption applies whether the matter proceeds to trial or settles.1

The exemption of the reporting provision of the standards, allows the valuation analyst to conduct the necessary procedures in formulating and expressing a conclusion of value or a calculated value, without including all the details in a written report. This saves the valuation analyst’s time and the client’s money.

With an estimated 95% of cases settling, this reporting exemption can be a cost savings way to help negotiate settlements. However, for cases that eventually end up at trial, I recommend spending the extra money on a full valuation.

If you have questions about a particular situation or would like to discuss this topic further, please give us a call.

1Statement on Valuation Services No.1; NACVA Professional Standards

 

Heather Deskins, CPA/ABV/CFF, CFE, CVA

Heather Deskins,
CPA/ABV/CFF, CFE, CVA

Managing Member
P.D. Eye Forensics, LLC