Adjusting the Income Approach
Highlights AICPA FVS Conference Panel on the COVID-19 Impact on Valuation
BVR Business Valuation Update, featuring Harold G. Martin, Jr., CPA/ABV/CFF, ASA, CFE | Partner, Valuation and Forensic Services
“Most of the audience questions during a panel discussion at the AICPA Forensic & Valuation Services Conference revolved around how to help make sure the income approach captures the impacts of the current environment. The panel, moderated by Jim Hitchner (Financial Valuation Advisors), included Lisa Cribben (Wipfli LLP), Harold Martin (Keiter), and Mark Zyla (Zyla Valuation Advisors LLC).
Their comments overall were geared to businesses that the pandemic has negatively impacted. The panel also made the point that, before you even get into the weeds of any valuation approach, you first need to determine whether the business can even survive. Once past that issue, can you still consider the market approach in today’s world? While the market approach is “problematic” today, it is definitely not dead, as some experts may believe. Deals are still being done, but you need to do more investigation as to why the deal took place. Zyla observes that, for example, bargain hunters may be looking for owners forced to sell. Cribben notes that, if you can adjust the income approach to reflect the pandemic, you can also adjust the market approach. In fact, she did a separate session at the conference on this, but that’s a topic for another article.
The panel did a good job revealing the current thinking behind various aspects of the market approach in response to the barrage of questions from the audience.”
For more highlights from the conference on Techniques for Projections, Treatment of Paycheck Protection Program (PPP) Loans, Capitalized Cash Flow (CCF) vs Discounted Cash Flow (DCF) and more, Continue to the full article: 2021 BVU-AICPA FVS panel
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