How Business Valuation Services Are Used In Financial Reporting, Tax Compliance, And Legal Proceedings

By Author: Mary Rose Somera
Total Articles: 94
Comment this article

Business valuation services are one of the areas of interest for CPAs as they broaden their offerings to include financial and other advisory services. Many accounting firms are expanding their business offerings to include valuation services. A CPA company may wish to consider opening a valuation practice for a number of good reasons, including the possibility for higher earnings and compensation.

In this article, we’ll give you an overview of valuation services for financial reporting, tax compliance, and litigation. Building a solid and long-lasting valuation practice requires understanding the areas in which certain valuation services enhance a company’s capabilities.

FINANCIAL REPORTING

For many businesses, navigating the intricate financial reporting process is difficult. Companies in the United States compile financial statements in line with GAAP, which frequently necessitates the requirement for financial reporting-related appraisals. GAAP declarations typically specify the standards to be applied, the date, and the types of assets and liabilities that need to be evaluated. The only current ...
... source of GAAP is the Accounting Standards Codification (ASC), which is maintained by FASB. Here are a few of the most typical valuation projects carried out for financial reporting needs.

Fair Value Measurement
Equity-Based Compensation
Mergers and Acquisitions

TAX COMPLIANCE

Tax compliance, deferral, or minimization demands of an entity—public or private—are essentially determined by these three factors. The Internal Revenue Code (IRC), Treasury Regulations, revenue rulings, Internal Revenue Bulletins, judicial procedures, and other authoritative sources have all produced regulations as a result of these driving forces. Independent and objective valuation services are required to make sure that entities do not experience unfavorable tax consequences, regardless of which component is the primary one.

Estate and Gift Tax Valuation
Nonqualified Deferred Compensation

LITIGATION

Engagements in litigation frequently center on the plaintiff’s economic losses and damage claims. In these kinds of engagements, valuation advisers are tasked with estimating the loss in earnings or the reduction in the worth of the plaintiff’s business. Due to the likelihood that litigation engagements may go to trial, it is crucial for expert witnesses to be independent of the parties involved in the lawsuit. Shareholder conflicts, divorce, bankruptcy, and contract breaches are typical examples of litigation engagements.

Shareholder Disputes
Divorce

A COMPLETE UNDERSTANDING OF BUSINESS VALUATION SERVICES

Analyzing the relevant rules, laws, and regulations in detail is necessary for a complete understanding of business valuation services. CPAs should become familiar with all of the above to make sure that the assets in question are fairly valued and accounted for in the financial statements, whether they are looking to expand their business valuation service offerings or are starting an engagement where business valuation is a key component.

Source: The CPA Journal

Contact Credo for Your Business Valuation Needs

Need help with determining a company’s enterprise value, the value of its outstanding securities, the value of its stock options, and the value of its intangible assets while ensuring that a company’s intangible assets are appropriately recorded on its financial statements? Credo can definitely help you! By merging scientific expertise with a pragmatic outlook, our valuation professionals serve clients during transactions, restructuring, and legal challenges. Contact us now to have a better understanding of our team’s capability to provide accurate and useful valuation guidance.