Business Valuations Blog

Damage Computation Services: Holiday Meals and Economic Damages Calculation: You Need to Follow the Recipe

My father-in-law lives his life according to the “five F's”: Family, Friends, Faith, Fitness and Financial Well-Being.  In the midst of the holiday season, we could probably add another “F” to that list: Food.

Meals with family and friends are often one of the highlights of the holidays.  Preparing dishes for these gatherings can be an interesting adventure, especially for me – someone who is more John Madden than Giada (I have always wanted to try to make a “turducken”).  Working in the kitchen, sometimes I will skip adding an ingredient to a dish if it is not available or if it is too difficult to prepare.  This sort of approach, however, does not work in the world of economic damage calculations.  Just like cooking a holiday dish, leaving out a key ingredient in an economic damage calculation can render the final product unusable (leaving a bad taste in everyone’s mouth).

Recently, I have run across a handful of economic damages reports in which future damages were not discounted back to present value.  This key process takes into account the time value of money for an award received today, related to future damages.  When future damages are not discounted back to the present, the concluded damage figure is overstated, which opens the expert up to rightful criticism during cross-examination.  While showing undiscounted future damages for presentation purposes is acceptable and can help users of the report better understand the damages analysis, the damage figure opined upon must include the appropriate adjustments for the time value of money.

When preparing an economic damages analysis, or a holiday meal for that matter, it is important that all of the key “ingredients” are included in the mix.  Our Valuation and Litigation Advisory Group at Skoda Minotti has the experience and technical knowledge to “follow the recipe” in creating supportable economic damage analyses.

To contact one of Skoda Minotti’s economic damage experts, post a comment below or contact our Valuation and Litigation Advisory Services Group at 440.449.6800.

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