Author Archives: Sean Saari, CPA/ABV, CVA, MBA

Update on the Fate of Private Company Valuation Discounts

We have waited in limbo for the past year to learn the fate of these proposed changes to the tax code. Just over a week ago, the estate and gift tax planning world finally received some closure.

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Sean Saari Discusses Separate Property Asset Tracing in Divorce in Cleveland Metropolitan Bar Journal Article

Sean Saari, CPA / ABV / CVA / MBA, authored a feature article in the July/August 2017 edition of the Cleveland Metropolitan Bar Journal.

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The Case of the Missing Post-Acquisition Income

One of my favorite games as a kid was the murder-mystery classic Clue.  Do you remember trying to deduce the culprit, the murder weapon and the room in which the attack took place? “I think it was Colonel Mustard in the kitchen with the candlestick.” “I think it was Mrs. Peacock in the hall with […]

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An Explanation of Income Approach to Valuation – Capitalization of Cash Flow Method

The Capitalization of Cash Flow Method is most often used when a company is expected to have a relatively stable level of margins and growth in the future – it effectively takes a single benefit stream and assumes that it grows at a steady rate into perpetuity.

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The Income Approach to Valuation – Discounted Cash Flow Method

There are two income-based approaches that are primarily used when valuing a business, the Capitalization of Cash Flow Method and the Discounted Cash Flow Method. These methods are used to value a company based on the amount of income the company is expected to generate in the future.

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An Explanation of the Asset Approach to Valuation

This balance sheet-focused method is used to value a company based on the difference between the fair market value of its assets and liabilities.

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An Explanation of Discounts for Lack of Control and Marketability

Before a final conclusion of value can be rendered, the nature of the ownership interest being valued must be considered. The value of an ownership interest is influenced by many of its characteristics, including marketability and control, which can have a meaningful impact on the concluded value of an ownership interest.

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FASB Simplifies the Goodwill Impairment Test

FASB’s new standard is expected to provide significant savings in both time and cost for companies that perform annual goodwill impairment testing, specifically when impairment is present.

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An Explanation of the Market Approach to Valuation – Guideline Transaction Method

The Guideline Transaction Method values a business based on pricing multiples derived from the sale of companies that are similar to the subject company.

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What is the Relationship Between Risk and the Required Rate of Return?

To put it simply, risk and the required rate of return are directly related by the simple fact that as risk increases, the required rate of return increases. However, it is a bit more complex than that, so let’s examine how the relationship between risk and the required rate of affects the value of a company.

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