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Reconciling Discount Rates for Intangible Asset Valuation in PPAs

Release Date: 02/13/2025

Financial Instrument Valuation Series: SAFEs, Convertible Notes, and Embedded Derivatives

The FVS Valuation Podcast

Simple Agreement for Future Equity (SAFEs), convertible notes, and embedded derivatives are among financial instruments which feature optionality, which can obscure confidence in the expected value of the associated future economic benefits. Published guidance is limited, and adding to the complexity, some alternative investment transactions have optionality features lurking within, dormant, and not readily apparent. This presents a wrinkle for practitioners who try to value assets which could morph into something else tomorrow. Listen to how specialists in this area approach...

Women Leaders in Business Valuation

The FVS Valuation Podcast

To celebrate Women's History Month, we are excited to share a special episode for our FVS Valuation podcast which explores the diverse backgrounds of several business valuation leaders, their paths into a career in business valuation, and their journeys to becoming experts in the field. The conversation highlights the many routes that can lead to success in business valuation, including The significance of obtaining the Accredited in Business Valuation (ABV) credential and how it has impacted their careers Their strategies for achieving a healthy work-life balance while excelling...

Transparency in Private Market Valuations

The FVS Valuation Podcast

In early 2025, the new US administration has been implementing changes which could affect regulatory oversight in private markets and alternative investments. Transparency in asset valuation is vital, especially where regulation is limited. Inadequate valuations or outdated financial reports can negatively impact investor decisions, leading to market inefficiencies and reduced confidence. Our presenter, an expert in private market valuation, provides insights and recommendations on managing these issues. Key takeaways: Industrywide benefits of enhanced transparency How to verify...

Reconciling Discount Rates for Intangible Asset Valuation in PPAs

The FVS Valuation Podcast

Maryellen and Ross delve into the subjectivity and controversy surrounding discount rates, the importance of understanding the asset and forecast inputs, and the application of market participant assumptions. Including these key takeaways: Subjectivity in Discount Rates: Understanding the significant subjectivity and controversy in determining discount rates. Qualitative Assessments: The role of qualitative assessments in aligning discount rates with associated risks. Resources and Guides: Utilizing available resources to enhance valuation analyses. Continue reading to learn about key...

Valuation Considerations in Equity Compensation

The FVS Valuation Podcast

Derivatives such as options have been used to reward employees for many years, and executive pay packages often include features of complex derivative securities such as options and restricted stock with vesting schedules based on various contingencies. Join us for a deeper look of what’s “under the hood” in the relevant valuation techniques such as lattice models and Monte Carlo simulation, and how these relate to regulations such as ASC 718 and the new Pay versus Performance (“PvP”) requirements for proxy statements. • Relevance of Internal Revenue Code...

M&A vs Equity Analysis (revisit)

The FVS Valuation Podcast

This is a refreshed version of an episode from October 2022. Professor Matthew Shaffer shares his journey into the field of accounting and his interest in corporate governance, valuation, and the market for corporate control. His article, "Why Value the Enterprise and Route to the Equity," explores the rationale behind using enterprise value evaluations in M&A settings instead of directly valuing equity. Josh and Matt discuss: Accounting as a fundamental framework for understanding business activities and market movements. Impact of Non-Recurring Items on Valuation Methods: Future...

Estate Planning – Anticipating the Change in 2025

The FVS Valuation Podcast

Plan early! The Tax Cut and Jobs Act (TCJA) significantly increased the estate tax exemption and there is uncertainty around whether it will be extended or modified. It's recommended to plan early and not wait until the last minute to ensure all necessary legal and valuation work can be completed in time. Greg Saunders and Lisa Cribben explore the complexities of estate planning and valuation, emphasizing the importance of early and continuous planning. They discuss various strategies to manage and reduce estate taxes, the critical role of valuation appraisers, and the potential impact of...

Valuation Case Law Update

The FVS Valuation Podcast

In this interview, Dave and Natalya discuss several significant court cases related to gift and estate tax valuations, ESOPs, and control issues in business valuations. Throughout the discussion, they emphasize the need for careful planning and the potential implications of court decisions on future valuation practices: Controversial Connolly Case which included life insurance proceeds in the value of a company for estate tax purposes Importance of Proper Valuation Methods: The discussion emphasized the need for accurate and appropriate valuation methods, particularly in ESOP cases...

Macroeconomic Update 2024 - Cost of Capital & Valuation Impact

The FVS Valuation Podcast

This interview was recorded on 10/28/24 at the AICPA-CIMA Forensic and Valuation Services Conference prior to the presidential election on 11/5. Economic issues discussed are still relevant as of the publish date11/21/24 Don’t miss this deep dive into the cost of capital and its implications for businesses and investors Nunes and Harrington, both from Kroll, share a macroeconomic update with the FVS podcast, focusing on the cost of capital and its valuation impact. The U.S. economy is performing better than expected, avoiding a recession and potentially achieving a soft landing, with...

Discounted Cash Flows with Roger Grabowski (revisit)

The FVS Valuation Podcast

This is a refreshed version of an episode from June 2022. Roger Grabowski has made numerous contributions to the field of valuation, particularly in forecasting cash flows using the discounted cash flow method (DCF). Roger speaks with Josh about the evolution of valuation practices and emphasizes the importance of understanding historical growth and differentiating between organic growth and growth through acquisitions. Topics discussed include: The importance of learning about the company and its management Thank you, Shannon Pratt - writing and presenting technical topics in an accessible...

More Episodes

Subjectivity in Discount Rates: Understanding the significant subjectivity and controversy in determining discount rates.
Qualitative Assessments: The role of qualitative assessments in aligning discount rates with associated risks.
Resources and Guides: Utilizing available resources to enhance valuation analyses.

Continue reading to learn about key resources available at AICPA-CIMA.com to improve your valuation analyses.

Guests
Maryellen Galuchie, CPA/ABV, Managing Director, Advisory Services, Grant Thornton
Ross McSwain, ABV, Sr. Manager, Advisory Services, Grant Thornton
Host Nene Glenn Gianfala, CPA/ABV, Vice President – Valuation Advisory Group, Chafe & Associates

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RESOURCES FOR FURTHER EXPLORATION
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Available for purchase Accounting and Valuation guides - Business Combinations

2024 AICPA & CIMA Forensic & Valuation Services Conference - Full conference package Session only: Determining the Appropriate Discount Rate for Valuing Intangible Assets in a PPA

Exclusive content available with AICPA FVS Section membership: Click here to join this active community of your FVS peers. You will get 16 credits of complimentary CPE and access to rich technical content

Valuations for Financial Reporting Toolkit - A resource for professionals who prepare valuations for financial reporting purposes

From the FVS Valuation Podcast archives

LEARN MORE ABOUT THE FOLLOWING AICPA CREDENTIALS:

Accredited in Business Valuation (ABV®) – Visit the home page and check out the ABV infographic

Certified in the Valuation of Financial Instruments (CVFI®) – Visit the home page and check out the CVFI infographic

Certified in Financial Forensics (CFF®) - Visit the home page and check out the CFF infographic

This is a podcast from AICPA & CIMA, together as the Association of International Certified Professional Accountants. To enjoy more conversations from our global community of accounting and finance professionals, explore our network of free shows here. Your feedback and comments are welcomed at [email protected]

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