Accountants' Handbook, Volume Two, Special Industries and Special Topics, 12th Edition

Chapter 25

Valuation of Assets, Liabilities, and Nonpublic Companies

Neil J. Beaton, CPA/ABV/CFF, CFA, ASA

Grant Thornton, LLP

25.1 Introduction

(a) Definition of Nonpublic Companies

(b) Reasons for a Business Valuation

25.2 Standards of Value

(a) Fair Market Value

(b) Fair Value for Financial Reporting

25.3 Auditing Guidance

25.4 Business Valuation Basics

25.5 Business Valuation Methods

(a) Income Approach

(i) Discount Rates

(b) Market Approach

(c) Asset-Based, or Cost, Approach

25.6 Discounts and Premiums

25.7 What a Valuation Report Should Contain

25.8 Intangible Assets—ASC 805/350 Issues

(a) Determine What Intangible Assets Are Present

(b) Determine the Accounting Guidance

(c) Determine the Appropriate Methodology to Estimate Fair Value for Financial Reporting Purposes

(i) Cost Approach

(ii) Market Approach

(iii) Income Approach

25.9 Does It All Add Up?

25.10 Credentials of a Valuation Analyst

Appendix A BVR's Glossary of Business Valuation Terms, 2009

Appendix B Additional Sources of Study

AICPA Publications and Pronouncements Related to Business Valuation

25.1 Introduction

Beginning in the early 2000s, the accounting environment has created an unprecedented need for accountants to be familiar with, and have a rudimentary understanding of, business valuation theory and implementation. The Financial Accounting Standards Board (FASB) has issued a number of pronouncements relating to business and asset valuation for financial reporting, including the most comprehensive fair value ...