Business Valuation + Due Diligence

Be Vigilant About Your Business Credit Score

As an individual, you’ve no doubt been urged to regularly check your credit score. Most people nowadays know that, with a subpar personal credit score, they’ll have trouble buying a home or car, or just getting a reasonable-rate credit card.

Economic Damages: Recovering What Was Lost

A business can suffer economic damages arising from a variety of illegal conduct. Common examples include breach of contract, patent infringement and commercial negligence. If your company finds itself headed to court looking to recover lost profits, diminished business value or both, it’s important to know how the damages might be determined.

Prepare for Valuation Issues in Your Buy-Sell Agreement

Every business with more than one owner needs a buy-sell agreement to handle both expected and unexpected ownership changes. When creating or updating yours, be sure you’re prepared for the valuation issues that will come into play.

Keeping a King in the Castle with a Well-Maintained Cash Reserve

You’ve no doubt heard the old business cliché “cash is king.” And it’s true: A company in a strong cash position stands a much better chance of obtaining the financing it needs, attracting outside investors or simply executing its own strategic plans.

7 Ways to Prepare Your Business for Sale

For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course, but if you’re leaning toward a business sale, here are seven ways to prepare:

How to Address Fair Value Issues with an Auditor During an Acquisition

After your company makes, or is in the process of making an acquisition, it is important to understand the purchase accounting. You know about fair value, and you have studied ASC 805 – Business Combinations in detail, but what’s next? Let us help answer a few questions to help save you time and cost.

Machinery and Equipment Valuations for Purchase Price Allocations

Assets typically found within the fixed asset category include machinery, equipment, and leasehold improvements. There are two choices for determining the fair value to be assigned to the fixed assets: (1) Hire a third party that specializes in the valuation of fixed assets; or (2) Provide your own estimation of fair value. Which option is best depends on a number of important factors.

How Much Financial Due Diligence is Right for Buying a Business?

If you're looking to buy or acquire a business, chances are you know about due diligence. Or at least have heard it is a good idea. But there lies the challenge - how do you know that you have done enough to feel confident that a business you are buying is a good investment or will provide you the earning potential you think it will?

Impairment Testing of Long-Lived Assets

This article discusses the testing of long-lived assets for impairment under ASC 360-10. It should be noted that there are significant differences between the tests required for indefinite lived assets under ASC 350-30, long-lived assets under ASC 360-10, and goodwill under ASC 350-20. Performing these tests in the proper order is critical to concluding the correct amounts of impairment (if any).

How to Value Inventory Under ASC 805

For purposes of ASC 805, items within inventory need to be stated at fair value. Fair value is often greater than their book value as book value only includes historical costs and ignores the required return accruing to inventory as it progress through the value creation process. The process of stepping up inventory to fair value often results in a greater amount of COGS in the first post transaction period and can drastically lower the expected profit of the business on a GAAP basis. Management should be aware of this and its possible effects on earn...

Should I Adopt the New Accounting Alternatives?

In 2014 the Private Company Council and FASB approved new accounting alternatives for goodwill and intangible assets that can be elected by most private companies. The accounting alternatives were designed to lower the complexity and cost associated with meeting the current standards.

The Six Inputs to a Black-Scholes Valuation

This article assumes use of the Black-Scholes formula (a closed-form model); as this is the method most private companies use.[2] We will explain where the typical inputs for each of these six factors are found and in certain cases, how they can be modified to fit the facts and circumstances of a specific situation.

Purchase Price Allocations: Can We Do This In-house?

Early in my career I was often asked to assist auditors with reviewing in-house valuations of intangible assets acquired in business combinations. I often responded to these requests with a large sigh. Having been through this process before I knew many CFOs and controllers believed they could put together an intangible valuation. After all, many CFOs … Continued

Accounting for Goodwill and Intangible Assets Just Got Easier

FASB approved new accounting alternatives for goodwill and intangible assets that can be elected by most privately held businesses. This article highlights (1) some of the changes allowed under the accounting alternatives, (2) areas in which companies may find cost savings, and (3) some of the potential issues with electing the alternatives.

Valuation is Key as the M&A Market Slowly Heats Up

After a lackluster 2012, domestic M&A activity is on the rise. Small business deal volume was up 62% in the second quarter of 2013 compared to the same period for 2012, according to BizBuySell.com Insight Report, which analyzes private business transactions in more than 70 major U.S. markets.