IBVA provides professional valuation and appraisal services to a vast array of clients operating in a broad spectrum of industries, ranging from small closely held companies to multi-million dollar corporations. There are many reasons and situations that require an unbiased opinion of value. The purpose and intended use of the valuation are part of the initial assignment discovery and could be for any of the following purposes. Full or partial ownership interest.
- Acquisition or Sale
- Ownership Transfers
- Economic Loss
- Shareholder/Partner Disputes
- Marital Dissolutions
- Insurance/Key Man
- Fairness Opinions
- Buy/Sell Agreements
- Gift & Estate Taxation
- Tax Planning
- Succession Planning
- Intangible Assets
- Management Planning
Once the purpose and intended use for the valuation has been established, the Standard of Value is determined.
- Fair Market Value (FMV) The price at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell; both parties having reasonable knowledge of relevant facts. (REVENUE RULING 59-60)
The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller action at arm's length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.
(ASA BVS definitions).
- Fair Value (FV) Definition varies from state to state, developed from case law, primarily in dissenting stockholder actions and shareholder oppression cases. Fair Value is also used in GAAP reporting and is not considered to be the same as FMV, which auditors generally consider to be a tax term.
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- Investment Value Value to a particular buyer or seller.
- Intrinsic Value What the value should be based on analysis of all the fundamental factors inherent in the business or the investment; ignores vagaries in the market.
IBVA fully subscribes to technically rigorous assignment standards and guidelines which include:
- The Appraisals Foundation (Uniform Standards of Professional Appraisal Practice).
American Society of Appraisers (Business Valuation Section).
- Internal Revenue Service (Revenue Ruling 59-60 and subsequent IRS rulings).
- A business value is developed after careful gathering of data, analysis of past trends and projections for the economy, industry, and subject company.
- These trends are used in the development and selection of the appropriate approach to value.
- Cost/Asset Approach
- Market Approach
- Income Approach
Each approach to value has multiple methods that may or may not be applicable to the subject company or the scope of work for each assignment. This is when the experience, knowledge, and training of the appraiser is a critical factor in the accuracy and defensibility of the value conclusion.