Business Valuation Committee Establishes a Technical Response Subcommittee

By Martin J. Lieberman

Have you ever had a business valuation question that you wanted to discuss with another practitioner but did not know where to turn? Are you puzzled as to how to audit “fair value” balances presented in client financial statements? The New York State Society of CPAs’ Business Valuation Committee, now in its second year, has established a subcommittee that members can access for help with their business valuation problems. Evolving issues such as subchapter S corporation tax-effecting or marketability discounts for control interests now can be discussed with your peers in a forum where ideas can be freely exchanged.

Business valuation has taken on new meaning for accountants since the implementation of Financial Accounting Standards Board (FASB) statements 141 and 142. These statements require initial valuations of tangible and intangible assets when accounting for a business combination, ongoing valuations of goodwill to test it for impairment, and the measurement of such impairment if detected. It is widely acknowledged that FASB’s initial foray into the world of valuation will be followed by additional accounting rules aimed at presenting balance sheets and income statements that more closely reflect market values of tangible and intangible assets. Audits of financial statements that contain goodwill or where a business combination has taken place will require the auditor to understand the mechanics of fair value and its implementation when assessing and attesting to asset values reflected in balance sheets.

Intangible assets are becoming more important as value drivers, but only recently, and even now only in the context of a business combination; they are generally not recognized in financial statements. The growing impact of intangible assets will dictate a change in how they are measured and reported. The methodologies used to value such assets are not a rolling-off-the-tongue type of endeavor. They require a significant amount of knowledge and experience. Auditors will need to either obtain the business valuation skills needed to adequately audit “fair value” derived balances, or engage outside experts to achieve credible audit support.

The Technical Response Subcommittee of the Business Valuation Committee has been established to help fill the huge void between theory and practice. Most auditors are not prepared to take on the task of assessing evidence substantiating client-prepared balances involving the use of business valuation techniques. The subcommittee will help professionals deal with these issues.

Either the seasoned valuation professional or the novice getting his feet wet can contact the subcommittee. The range of issues the subcommittee will respond to is not limited to accounting topics. Questions on valuations for tax purposes, litigation, succession planning, ESOPS, stock option plans, option values or mergers and acquisitions also are welcome.
The subcommittee is made up of the following members:

Gary M. Karlitz (212) 697-1000
Russell T. Glazer (516) 364-4567
Brian K. Pearson (716) 839-5290
Morton M. Cohen (631) 427-1414

Your questions will be exposed to all Business Valuation Committee members by posting it on the Business Valuation Committee website at www.nysscpa.org.