By Harold G. Martin, Jr., CPA/ABV/CFF, ASA, CFE | Partner, Valuation and Forensic Services
When valuing companies under the fair market value standard, many practitioners devote the majority of their report to explaining the valuation approach, but then deduct a discount for lack of marketability (DLOM) that materially reduces value without providing adequate support. Such limited analysis of a DLOM is coming under increased scrutiny by the IRS as well as other users. The new Discount for Lack of Marketability Guide and the related Toolkit by Jim Hitchner, Jim Alerding, Josh Angell, and Kate Morris, provides practitioners with the information and tools necessary to properly calculate and support a DLOM using both qualitative and quantitative methods.
The DLOM Guide is an excellent reference for both practitioners and users. It is a very detailed and well-documented text which includes a comprehensive discussion of the current theory, empirical studies, databases, and methods used to determine DLOMs.
This article was featured in Business Valuation Resources, LLC | Business Valuation Update, Vol. 23, No.3, March 2017. Reprinted with permission.
Harold G. Martin, Jr., is the Partner-in-Charge of Keiter’s Valuation and Forensic Services Group. He is also a member of Keiter’s Executive Committee. He has over 30 years of experience and specializes in valuation and forensic accounting, including financial investigations and litigation consulting and expert witness services. He is a frequent speaker and writer on valuation topics. Read more of Harold’s insights on our blog.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.