We find this comes up whenever we do a Business Valuation.  The question concerns Goodwill and how it should be handled in a Valuation Report.

There are as many ways to handle Goodwill in an Evaluation as there are Certified Public Accountants!  Well, not quite, but a great many CPAs use different formulas and there are so many and varied approaches, that the FASB issued a Defining Statement, way back in June of 2001.

Let me state upfront, we are not CPAs.  Nor is Pro Biz a CPA firm.  We do not pretend to have a higher level of expertise in interpreting these rules.  But we do have very smart software!  And we recognize that Goodwill and how other intangible assets are handled is vitally important to the outcome of YOUR Business Valuation!

It would be fair to say that the issue of Goodwill and other intangible asset valuation allows the Appraiser to customize the Valuation Report to the needs and the purpose of the Client.  That is why we ask so many questions.  Are you up against the IRS and they are killing you on the Goodwill issue, for instance. In your defense we would take a different position than if you were selling your company and want to maximize Goodwill value to obtain the highest price from a Buyer.

This is where S 142 comes into play.  Everyone now has a third party reference!

The point we want to leave you with is this, our questionnaire and our software take 142 seriously.  You can take our Pro Biz Valuation to the Bank!

Summary of Statement No. 142 for your reading pleasure. more…

FREE TIPS FOR BUSINESS APPRAISALS

Wouldn’t it be nice if someone would tell you, in advance, what you should have BEFORE you make that initial phone call to the business appraiser?  At Pro Biz we always say that a better prepared client is a better client!  So here are some tips to help you be better prepared.  First, know what kind of an appraisal you want.

That sounds kind of basic doesn’t it?  But actually, most people seem to have a hard time putting it in words in an initial phone call. It often takes several minutes of probing for the appraiser to drill down to “what it is.”  Here’s my simple tip: Before you call, sit down with a yellow pad and pen and try to write it out.  If you have every been a part of a company trying to write a Mission Statement,you know exactly where this is going.  It’s harder than it looks!  It probably takes a dozen rewrites to get it condensed to a single declarative statement. But that is the point, really.  It forces you to think critically and succinctly.  When you make that call and can articulate what you want and need in the first 30 seconds, you are miles ahead!

Another tip, closely related to the first is, get a head start on getting all the needed documents together.  After you know what you need the appraisal for, try to imagine what documents will be needed.  If it is a Business Valuation, such as a third party sale, you can be sure that 3-5 years tax returns will be needed as well as P&L’s and Balance Sheets. Other documents like deeds, leases, Bills of Sale, etc can really take time to locate. Get a jump start of collecting these ASAP.

My last tip is the most important of all, make sure the business appraiser is certified and can and will certify  your completed business appraisal.  Everything else is a total waste of time unless the business appraisal is a certified appraisal.

A desktop appraisal report is typically used to determine value without the expense of an on-site inspection and detailed analysis of the condition of the machinery or equipment. You send us pictures and a brief description of the machinery or equipment and we provide a value based on this information.  You may consider this if the items are well documented, but do not tryo to save money on the next thing…

A summary appraisal report is typically utilized for estimating the value of machinery and equipment. On-site inspection details are included in the appraisal report. This USPAP compliant report expresses value as a single figure for each tangible asset valued and the aggregate is reported as a single number.

Just say “No!” to a Non-Certified Appraiser

Why?  It’s not always just a lack of requisite knowledge or expertise.  Many non certified persons have a great deal of industry experience and frankly, we ourselves consult with them ourselves from time to time!  The problem is that a machinery and equipment dealers or auctioneers may have a hidden agenda.   Worse yet, their opinions don’t hold weight if put to the legal test (See USPAP)   You see 99% of these individuals are not certified or trained in providing USPAP compliant appraisal reports. If the appraisal report you obtain is not USPAP compliant it is not a “qualified” appraisal prepared by a “qualified” appraiser pursuant to the Council of Foundations, IRS, or others.

The Uniform Standards of Professional Appraisal Practice (USPAP) are the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services. Standards are included for real estate, personal property, business and mass appraisal.