A company that converts its entity from a C corporation to a limited liability company (LLC) may incur tax consequences. When a C corporation liquidates its assets and then transfers those assets to a LLC, both the corporation and the shareholders pay federal income taxes on their respective gains. The IRS suggests using an independent third-party valuation firm to determine the fair market value of the company’s assets at the time of liquidation.
The IRS requires all Individual Retirement Account (IRA) assets to be valued annually at their fair market value. The IRS requirement holds true even for assets/securities not traded on established markets, or are non-marketable. The IRS suggests you engage an independent third-party valuation firm to complete a formal valuation opinion of these non-marketable, or thinly traded assets/securities.
Internal Revenue Code (IRS) Section 409A requires a company issuing deferred compensation (e.g. stock options) to do so at fair market value. The company employees receiving the deferred compensation benefit may incur a 20% federal income tax penalty in the event the company issues the deferred compensation below fair market value. Thus, it is prudent for a company’s management and board of directors to engage an independent third-party valuation firm to ensure employees receive their deferred compensation at fair market value.
An Employee Stock Ownership Plan (ESOP) is a defined contribution plan that allows for succession planning between companies and their employees. An ESOP provides liquidity to a company’s owners by allowing their employees to purchase equity in the company, rather than selling the company’s equity a financial sponsor, or strategic investor. ESOP’s require a formal valuation opinion to be completed annually. The formal valuation opinion must adhere to the guidelines set forth by The Employee Retirement Income Security Act (ERISA).
Individuals gifting or transferring assets between one party/entity and another party/entity must assign a value to each asset being gifted or transferred for federal income tax purposes. The IRS suggests individuals engage an independent third-party valuation firm to complete a formal valuation opinion.
AICPA Statement of Position 90-7 (SOP 90-7) mandates that the balance sheet of a company emerging from Chapter 11 bankruptcy be restated to fair value. The reorganization and allocation of the entity’s value must then also be in conformity with the procedures specified by ASC 805.
Under ASC 718, a company that that awards its employees stock-based compensation must recognize the fair value of those awards in its financial reporting. The cost of the stock-based compensation is recognized over the period the employee provides a service, or the vesting period. Directly related to IRC 409A, a firm’s value must first be determined through detailed financial analysis (ideally performed by a knowledgeable third-party) in order to ascribe the correct price to the stock-based compensation units.
ASC 815 involves rigorous reporting standards, including the condition that all hedging and derivative instruments be measured and recorded at their respective fair market value. Applying multiple methodologies such as the Binomial Option Model, the Monte Carlo Simulation, and the Black Scholes Model, Scalar Analytics is able to pinpoint the most appropriate value of these complicated financial instruments.
ASC 820 is a provision which requires private equity and venture capital firms to value their holdings using a fair value measurement. This measurement isn’t easily calculated as portfolio valuation and can be a convoluted, multifaceted process involving an in-depth understanding of current market conditions. At Scalar Analytics we understand the intricacies involved in valuing these illiquid investments, offering valuations with a greater level of accuracy and reliability.
For growing companies, an acquisition can signify increased acceleration toward achieving strategic goals. As part of this process, the According to the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805 requires acquired assets and liabilities to be recorded at their fair market values, which can represent a significant valuation challenge. For this reason, astute acquirers will often contract valuation firms to aid in these key assessments.
Under ASC 350, companies must perform an annual test to determine if the goodwill of any of its reporting units is impaired. The goodwill impairment test is generally performed in two stages. The first determines if goodwill is impaired, with the second stage determining to what extent goodwill is impaired. Given the complexities involved in each stage, it is often necessary to seek the advice of experts to reach the appropriate valuations.
According to ASC 360, a long-lived asset (or group of assets) should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount (book value) of the long-lived asset (or group of assets) might not be recoverable (i.e. information indicates that an impairment might exist). Companies are responsible for routinely assessing whether impairment indicators are present.
Scalar provides a valuation report for SBA Lenders that are in need of a Certified Business Appraisal for a business that requires 7(a) financing. Per SBA SOP 50 10 5(H), if the amount being financed minus the appraised value of real estate and/or equipment is greater than $250,000 or if there is a close relationship between the buyer and the seller, the lender must obtain an independent valuation from a qualified source.
In the event that a company issues cash equivalents, equity, or debt, the law requires that the relevant transfer not leave the company insolvent or with insufficient capital. For this reason, a solvency opinion becomes essential to management teams and their boards of directors in avoiding fraudulent transfers and distributions.
A Fairness Opinion involves a comprehensive valuation of a business entity that is being sold, performed for either party involved in an acquisition. The purpose is to ensure a realistic valuation for the seller, or to certify a reasonable purchase price for the acquiring firm. Scalar works with executive teams and their boards of directors to ensure business combinations will receive fair consideration for their equity.
Enterprise value represents the entire economic value of a company, taking into account the individual capital structure of the firm. Specifically, it is a measure of the theoretical takeover price that an investor or business would have to pay in order to acquire a firm. Scalar performs enterprise valuations for all internal planning purposes.
Scalar provides either a point valuation, or a range of values for a company seeking guidance on structuring an acquisition, merger, new financing, equity buy-back, divestiture, or any other capital structure event. Valuation consulting can serve as a tremendous aid to management and board members in making informed and educated decisions regarding corporate strategy.
Scalar provides a full range of bankruptcy support services including: business valuation, liquidation analysis, cash flow and capital structure assessments, preference litigation, and fraudulent conveyance analysis.
Scalar provides the financial analysis necessary to enable corporate counsel to develop a litigation strategy that assesses risk exposure, reduces costs, and better informs settlement discussions.
Scalar professionals have the financial, accounting, and legal expertise and experience to thoroughly prepare our clients in every phase of the litigation process, from case assessment to discovery to trial. Our associates offer premium and proficient litigation support at reduced rates.
Scalar offers forensic accounting, fraud investigations, and compliance expertise to clients involved in healthcare litigation. Scalar provides damages analysis for both payer and provider disputes involving alleged fraud, Qui Tam, and False Claims Act investigations, billing and coding assessments, and accounting compliance.
Scalar specializes in valuations of closely held business interests and other securities that often form the basis of estate litigation. Scalar provides discount analysis for partnerships and other estate planning vehicles. Our consultants offer litigation support for IRS appeals and tax court proceedings.
Scalar offers intangible asset valuation, purchase price allocations, transfer pricing, and litigation support for intellectual property matters. Our litigation services provide lost profits, reasonable royalty, price erosion, disgorgement, and unjust enrichment.