Demystifying Valuation, Economic Damages + Forensic Accounting

Community property vs. equitable distribution

In divorce proceedings – absent a prior agreement between spouses – marital property is apportioned by the court to each spouse, depending on the state in which divorce proceedings are conducted. Marital property may be divided between spouses by the community property model or by the equitable distribution model. So, what’s the difference between community …

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Blue sky – does my company have any?

Blue sky, what is it? And how do I know if my company has any? First, let’s define blue sky. Blue sky, or goodwill, is the excess purchase price over the market value of the tangible assets recorded on the balance sheet. For example, if a company has $500,000 of current assets and $500,000 of …

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What is a working capital true-up calculation?

In most mergers and acquisition transactions, the asset purchase agreement states that the seller is required to deliver to the buyer an agreed-upon amount of working capital (excluding cash in most cases). This is known as the Target Working Capital and for the purposes of this post, let us assume $1 million is the Target …

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Cryptocurrency and divorce: key questions to consider

Interest in cryptocurrency, also known as digital currency, has recently exploded. Bitcoin perennially continues to be the largest cryptocurrency, followed by Ethereum. There are well over five thousand cryptocurrencies with new ones being formed and obscure names rising into prominence every day, most recently Dogecoin. One industry report estimates that approximately 20 million Americans may …

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Here’s how to fail when testifying as an expert

I first started testifying when I was a cop on the Tucson Police Department many moons ago. Those cases all involved the commission of a crime – some of the misdemeanor type and others involving felonies. After my career as a police officer, I became an accountant and then, eventually, a CPA. As a CPA …

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Estimating future earnings of a child or minor

One of the biggest challenges facing an expert when assessing damages in matters involving children is the future lost wages portion of a calculation. Estimating future earnings, probable educational attainment, and evaluating worklife expectancy are only some of the considerations that make these cases difficult and when the incident happens at such a young age, …

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Sell-side due diligence: Cheerleader or value service?

Should a sell side due diligence be an exercise where the consultant provides a financial due diligence report that presents the sellers business in its best light at the expense of overlooked problem areas, or should the consultant perform rigorous procedures to uncover potentially problematic issues that could disrupt the sales process if the buyer …

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Prenuptial agreements and the forensic accountant

Prenuptial Agreements (prenups) are used between two people prior to marriage to address certain financial aspects of their marriage. For those entering a second or third marriage, it can help define what assets will be available to the future spouse and what will be set aside for the children. A prenuptial agreement can make the …

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Will it ever be the same – One year later

About a year ago I drafted a blog titled ‘Will it ever be the same again?’ where I discussed how investor, cash flows, and growth expectations will impact valuations of privately held companies in the COVID-19 environment. One year later, let’s check how that blog aged over the past year (*spoiler alert* my expectations of …

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Discount for lack of control and majority interests

Can you, and should you, apply a discount for lack of control when valuing a majority interest? Well, with almost everything valuation related, it depends. A recent tax court case (Estate of Warne v. Commissioner) allowed a small discount for lack of control discount for majority interests in several Limited Liability Companies (LLCs). Don’t miss: …

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