Business Appraisals
Orchard Partners specializes in business valuation. We concentrate on appraisals for financial reporting and tax purposes. We target rapidly growing companies. The benefit? We understand the issues. We’re respected for what we know. Your appraisal project is our top priority.
A business appraisal begins with a series of questions. What is the appraisal date? What type of security is being valued, common stock or something more esoteric? Is it assumed to be marketable or non-marketable? A minority interest or a controlling interest?
Perhaps, most importantly, why is the appraisal needed?
Orchard values equity securities for financial reporting and tax purposes. Sometimes these purposes can overlap, as when a company is issuing stock options. An appraisal of the common stock for tax purposes under Regulation 409A may also be used for financial reporting under SFAS No. 123R. Often, however, we find that appraisal requirements differ depending on how the appraisal will be used. In an appraisal for financial reporting, it is necessary to demonstrate an understanding of the relevant accounting standards and practice. This guidance takes various forms:
- As a "statement of financial accounting standards" (SFAS) published by the Financial Accounting Standards Board (FASB). For example, SFAS No. 157 is the standard for "Fair Value Measurements", which provides the FASB's definition of fair value.
- As an issue addressed by an "emerging issues task force" (EITF) of the FASB.
- As practice guidance published by an industry organization, such as the American Institute of Certified Public Accountants (AICPA), the Appraisal Foundation, or the Appraisal Issues Task Force (AITF).
If the appraisal is to be used for tax reporting, accounting standards are less relevant than IRS pronouncements (such as Revenue Ruling 59-60), court cases and the body of literature which addresses business appraisals for tax purposes. If the appraisal is to be used for an Employee Stock Ownership Plan (ESOP), regulations from the Department of Labor are relevant.
It is the appraiser's job to know the appropriate standards and practices for a particular type of appraisal. To that end, we work hard to stay up-to-date on the latest pronouncements, and we're constantly exchanging ideas and findings with others in the industry.