Income statement adjustments (normalizing and control) are critically important in providing estimates of earnings for capitalization using methods under either the income or market approaches to valuation, as well as for providing a base level of earnings from which to forecast when using discounted future benefits methods. Appraiser judgment is obviously required in the assessment […]
Many appraisers do not distinguish between normalizing and control adjustments or between types of normalizing and control adjustments. This failure by some appraisers to distinguish between two significantly different types of adjustments leads to confusion on the parts of users of valuation reports and courts. We seek to end that confusion.
Dr. Ashok Abbot, a professor at West Virginia University, a business appraiser, and a well-known speaker, has written a review of my book, Buy-Sell Agreements for Closely Held and Family Business Owners. This review appears in the Fall 2010 issue of Business Valuation Review. This short post highlights some of his comments: This book … is aimed […]
Last week I was in Orlando at the Rosen Shingle Creek Resort speaking at the 33rd Annual Institute of the Florida Chapter of the American Academy of Matrimonial Lawyers (AAML). More than 400 matrimonial attorneys, forensic CPAs, and other professionals were present at this very attractive venue. This was the first time I […]
In the last two posts (here and here), we introduced the concept of normalizing adjustments to the income statements of businesses as an essential element in the development of valuation indications at the marketable minority level of value (or as-if-freely-traded). While some appraisers still disagree regarding the applicability of Type 2 Normalizing Adjustments, we find […]
We continue the discussion of normalizing adjustments, which are important adjustments in valuation analyses generally, and potentially critical in statutory fair value determinations.
This post and the next one (or two) lay the theoretical foundation for the normalizing adjustments applied in valuation practice.
In the second post in this series on statutory fair value, we provided background information on the Gordon Model. This model is a single-period income capitalization model that summarizes the way securities are valued in the public markets. The Gordon Model is shown again as a beginning point for discussing of the Integrated Theory of […]
“Who owns the stock after a trigger event?” is an important question. Many buy-sell agreements do not treat the continuing rights of ownership (or not) following trigger events in specific terms.
In the second post in this statutory fair value series, we provided background information on the Discounted Cash Flow Method of Valuation and the Gordon Model. THE GORDON MODEL The Gordon Model is a single-period income capitalization model that provides a summary interpretation of how securities are valued in the public markets. The basic formulation […]