We customize and deliver valuations of businesses and business interests for a variety of purposes including: Financial Reporting; Tax Compliance; Management Planning; Dispute and Litigation; and Investment Analysis. We develop valuation reports and analyses that are objective, supportable and transparent for the client, advisors, auditors, attorneys and/or other stakeholders. ROCKPORT VALUATION market offerings are summarized below.
Valuations for U.S. financial reporting are governed by standards issued by the Financial Accounting Standards Board (FASB) in the Accounting Standards Codification (ASC). Company auditors follow audit standards that direct their testing of valuation methods, models, inputs and data. Rockport understands these requirements and develops valuations for financial reporting standards such as: ASC 350 (goodwill impairment analysis); ASC 805 (purchase price allocations); and ASC 820 (portfolio company investments). Often, we are asked by our clients to lead the process to communicate directly with the auditor and their internal valuation specialist to ensure that we resolve any differences of opinion in an efficient manner to finalize the valuation process.
ASC 350 requires companies to perform an annual test to determine if goodwill of its reporting units is impaired. We prepare the valuation of equity that is used the for impairment test (step 1), and support the client through the valuation process (step 2) if the test indicates that goodwill is impaired.
ASC 805 requires companies to estimate and report the fair value of the assets acquired and liabilities assumed in a business combination, which is often referred to as a purchase price allocation. The valuation process for a purchase price allocation is complex: we assist the client with an analysis of transaction consideration, opening balance sheet, and acquired company projections. We apply best practices in our valuation modeling and assessment of acquired tangible and intangible assets.
ASC 820 requires asset management firms such as private equity and hedge funds to estimate and report the fair value their investments. We work closely with the client to understand the investment, analyze relevant market data, and then develop an independent valuation that is supportable and reasonable.
Valuations for tax compliance are governed by standards issued by the U.S. Internal Revenue Code (IRC). We understand the valuation implications of the IRC and perform valuations for the following situations: Gift/Estate Tax; Entity Conversion; and IRC 409A.
Gift/Estate Tax: IRC tax rules require individuals and/or family members that gift or transfer assets/interests between each other to assign fair market value to the asset/interest. We prepare the valuation opinion of the asset/interest and issue the client a valuation report based on IRC rules and guidance.
Entity Conversion: A company may elect to convert from a C corporation to an S corporation or limited liability company, or vice versa. We prepare the valuation of the company’s stock that is used to support the relevant tax calculations.
IRC 409A: Private companies often issue deferred compensation (e.g., stock or stock options) to management and key employees. We estimate the fair value of the company’s stock and/or stock options to support the company’s tax position and ensure compliance with IRC rules.
Private company management and boards may seek to understand the value of the company as they consider strategic alternatives such as the potential sale of the company, a buy-in of a partner/minority interest, and/or analysis of growth scenarios. Rockport effectively works with the company to customize and deliver valuation analyses that provides insight and support for the company’s strategy and point of view on value.
DISPUTE AND LITIGATION
Private company owners and investors engage law firms to protect their interests that are subject to a dispute or in litigation. Rockport supports the efforts of the attorney and their client to construct credible and relevant valuations and analyses. We may serve the client in the background building valuation models and/or financial analyses, or front and center as an expert witness presenting a credible case for our point of view on valuation.
Banks and other capital providers may seek a third-party valuation of a business and/or business interest prior to the issuance of capital. Rockport prepares reports and analyses that present our independent valuation opinion, which serves the institution with a reasonable basis for providing capital.