Podcast
Questions and Answers
What organization replaced the AICPA's former authoritative body in 1973?
What organization replaced the AICPA's former authoritative body in 1973?
- American Institute of Certified Public Accountants (AICPA)
- Accounting Principles Board (APB)
- Securities and Exchange Commission (SEC)
- Financial Accounting Standards Board (FASB) (correct)
Which Statement of Financial Accounting Standards was issued by FASB in June 2001 pertaining to business combinations?
Which Statement of Financial Accounting Standards was issued by FASB in June 2001 pertaining to business combinations?
- SFAS No. 142
- SFAS No. 141 (correct)
- SFAS No. 157
- SFAS No. 116
What is the effective date for the Accounting Standards Codification (ASC) for interim and annual periods?
What is the effective date for the Accounting Standards Codification (ASC) for interim and annual periods?
- September 15, 2009 (correct)
- November 15, 2007
- January 1, 2008
- June 30, 2008
Which of the following opinions was previously issued by the Accounting Principles Board (APB) regarding intangible assets?
Which of the following opinions was previously issued by the Accounting Principles Board (APB) regarding intangible assets?
What is considered the source of authoritative generally accepted accounting principles (GAAP) for nongovernmental entities?
What is considered the source of authoritative generally accepted accounting principles (GAAP) for nongovernmental entities?
What is the purpose of using historical versus projected economic income in estimating future benefits?
What is the purpose of using historical versus projected economic income in estimating future benefits?
Which method is commonly used to calculate the estimated future benefits?
Which method is commonly used to calculate the estimated future benefits?
What is the primary factor to consider when validating calculations of estimated future benefits?
What is the primary factor to consider when validating calculations of estimated future benefits?
The Capital Asset Pricing Model (CAPM) is primarily used to determine what?
The Capital Asset Pricing Model (CAPM) is primarily used to determine what?
What is the Weighted Average Cost of Capital (WACC) used for?
What is the Weighted Average Cost of Capital (WACC) used for?
Which of the following is NOT a common method for determining capitalization/discount rates?
Which of the following is NOT a common method for determining capitalization/discount rates?
What does the term 'risk premium' refer to in financial analysis?
What does the term 'risk premium' refer to in financial analysis?
Which section of the capital/discount rates chapter discusses the less frequently used small business build-up models?
Which section of the capital/discount rates chapter discusses the less frequently used small business build-up models?
What is the range of capitalization rates for tangible assets as per Revenue Ruling 68-609?
What is the range of capitalization rates for tangible assets as per Revenue Ruling 68-609?
Which Revenue Ruling specifically recognized criteria for determining discounts for lack of marketability?
Which Revenue Ruling specifically recognized criteria for determining discounts for lack of marketability?
What statement did Revenue Ruling 81–253 make regarding minority interest discounts?
What statement did Revenue Ruling 81–253 make regarding minority interest discounts?
Which Revenue Ruling provided guidelines for valuing preferred stock?
Which Revenue Ruling provided guidelines for valuing preferred stock?
What is the range of capitalization rates for intangible assets as discussed in Revenue Ruling 68-609?
What is the range of capitalization rates for intangible assets as discussed in Revenue Ruling 68-609?
Which Revenue Ruling stated that it superseded Revenue Ruling 81–253?
Which Revenue Ruling stated that it superseded Revenue Ruling 81–253?
In which year was Revenue Ruling 81–253 issued?
In which year was Revenue Ruling 81–253 issued?
What key focus did Revenue Ruling 68-609 emphasize regarding business valuation?
What key focus did Revenue Ruling 68-609 emphasize regarding business valuation?
What is one of the main purposes of valuing a business?
What is one of the main purposes of valuing a business?
Which of the following is NOT a typical reason for valuing a business?
Which of the following is NOT a typical reason for valuing a business?
What methodology is likely affected by the purpose of a business valuation?
What methodology is likely affected by the purpose of a business valuation?
Which scenario would require a business valuation specifically for regulatory purposes?
Which scenario would require a business valuation specifically for regulatory purposes?
In what situation would a valuation be important for 'buy/sell agreements'?
In what situation would a valuation be important for 'buy/sell agreements'?
Which of the following best describes the term 'exchange value' in business valuation?
Which of the following best describes the term 'exchange value' in business valuation?
When might a business valuation be necessary for 'expert testimony/litigation support'?
When might a business valuation be necessary for 'expert testimony/litigation support'?
Which of the following is a factor that may influence the methods used in valuing a business?
Which of the following is a factor that may influence the methods used in valuing a business?
What year was the IBA established?
What year was the IBA established?
What is the primary goal of IBA's mission?
What is the primary goal of IBA's mission?
Which designation is achieved by meeting established criteria in IBA's accreditation program?
Which designation is achieved by meeting established criteria in IBA's accreditation program?
What is included in IBA's Market Database?
What is included in IBA's Market Database?
What is one of the established goals of IBA?
What is one of the established goals of IBA?
How does IBA support its members?
How does IBA support its members?
What distinguishes the CBA designation?
What distinguishes the CBA designation?
What role do volunteers play in IBA?
What role do volunteers play in IBA?
Study Notes
Defining and Measuring Future Benefit Streams
- Importance of estimations for planning and financial forecasting.
- Historical vs. projected economic income helps gauge potential future benefits.
Capitalization and Discount Rates
- Capitalization/discount rates are critical in valuing businesses.
- Proper rates ensure accurate valuation reflecting risks associated with future earnings.
Revenue Ruling Highlights
- Revenue Ruling 68-609 mandates evaluating adjusted net assets for business value.
- Guidelines for capitalization rates:
- Tangible Assets: 8% to 10%
- Intangible Assets: 15% to 20%
- Revenue Ruling 77–287 provides criteria for discounts for lack of marketability.
FASB Involvement in Valuation
- FASB (Financial Accounting Standards Board) recognized as authoritative since 1973.
- SFAS No. 141 addresses business combinations; SFAS No. 142 focuses on goodwill and intangible assets.
- FASB's Accounting Standards Codification (ASC) authoritative for GAAP applications.
IBA and Business Appraisal Education
- IBA (International Business Appraisers) established in 1978, focuses on appraiser education and market data.
- IBA provides a supportive framework for members, promoting professional excellence.
- IBA Market Database includes over 33,000 comparables accessible to members.
Goals of IBA
- Raise awareness of business appraisal as a specialized profession.
- Ensure access to qualified and ethical appraisers.
- Expand knowledge of business appraisal theory and practice.
- Provide information, programs, and services to members.
- Influence national policies affecting the appraisal community.
Professional Accreditation in Appraisal
- Certified Business Appraiser (CBA) designation recognizes accomplished business appraisers.
- CBA enhances credibility among peers and in legal contexts.
Purposes for Valuing a Business
- Valuation serves various purposes: tax, litigation, transactions, and regulatory compliance.
- Common reasons for valuation include:
- Mergers and acquisitions.
- Fairness opinions and shareholder transactions.
- Estate planning, taxation, and bankruptcy assessments.
- Supporting loan applications and eminent domain proceedings.
Valuation in Mergers and Acquisitions
- Valuation essential to determine exchange values during mergers.
- Helps in establishing sale prices during divestitures or business sales.
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Description
This quiz focuses on defining and measuring future benefit streams using various methodologies. It covers the comparison of historical versus projected economic income and the validation of calculations for estimating future benefits. Test your knowledge on these important financial concepts.
