Financial Reporting Opinions
Purchase Price Allocation and Goodwill Impairment – ASC 805 and 350
Audit firms will often require a company to retain a third-party independent valuation advisor to prepare an acquisition accounting report following (and possibly during) the completion of a transaction. Following the completion, audit firms typically require goodwill impairment testing and analysis as a critical component of post-transactional monitoring.
Given the complexity of and intricacies contained within ASC 805 and 350, it is important to employ an experienced, knowledgeable valuation firm for the sake of determining relevant fair value indications of businesses, business lines and assets. The FASB issued ASC 805 and 350, which mandate specific guidelines in the determination of and reconciliation to transactional components giving consideration to the fair value of non-contingent compensation, contingent consideration, and liabilities, as well as guidelines in accounting for goodwill and other intangible assets. Accordingly, Salter Group’s extensive experience across a broad array of industries in assessing fair value of assets under ASC 805 and 350 enables us to provide independent, cost-effective opinions designed to withstand reviewer scrutiny, as well as facilitate financial reporting, internal planning and other processes. Our approach focuses on developing consensus among involved parties and maintaining consistency across methods to report fair value.
Portfolio Valuations for Private Equity Funds, Hedge Funds, Banks and other Capital Market Constituents – ASC 820
Regulatory changes, best practices and evolving investor scrutiny have increased the need among venture capital, private equity, debt and hedge funds, and other capital market constituents for credible, independent valuations of illiquid portfolio businesses, assets and securities. Salter Group has proven to be a leading provider of risk analytics and valuation services in such circumstances with the capability, credibility, and objectivity to satisfy this growing need. Specifically, Salter Group can provide venture capital, private equity, and other capital market constituents with defensible, cost-effective analyses, such as the following:
- Valuation of portfolio companies or investments in portfolio companies within the fund
- Valuation of illiquid portfolio investments and loans
- Assessing or developing independent loss frequency analyses on loans utilizing alternative analytic methods
- Assessing or developing confidence intervals and return analyses on equity investments utilizing alternative analytic methods
Incentive compensation, options and “cheap stock” – ASC 718
All public and non-public companies are required to include stock-based compensation as an expense in accordance with ASC 718 (previously SFAS 123R). Having extensive experience in creating fair value opinions covering the enterprise, specific stock-based incentive securities, and the associated expensing of these incentives over applicable time periods, Salter Group is able to provide credible and objective opinions to our clients. Additionally, given the inter-related nature of IRC 409A with ASC 718 for most private companies, an understanding of the differences in the application of the fair value standard for financial reporting compliance and the fair market value standard for tax reporting compliance is key to creating a defensible and credible opinion. Salter Group, having completed and defended well over 300 of these types of engagements, has experience with and understands these subtle differences. This has enabled us to assist numerous companies, audit committees, company accountants, investment banks, and related parties by providing independent and credible opinions that enable compliance with ASC 718.
Revenue recognition for multi-element licensing arrangements – ASU 2009-13
Recently revenue recognition requirements for multi-element licensing arrangements have changed in order to better match the recognition of revenue in accordance with the economic usefulness of various deliverables included in a license contract. These changes have specific relevance in the biopharmaceutical, medical device and technology sectors as industry standards for contracts typically include multiple deliverables. Under the new standard, valuation analytics are required conclude a best estimated selling price when vendor specific objective evidence or third party evidence is not available, usually the case for most contracts. Salter Group brings a special expertise to these analyses, combining its transactional and licensing advisory expertise with a leading technical background in the valuation of these arrangements for the industry verticals its serves, enabling executives to not only understand a potential licensing transactions economics but also the revenue consequences of said arrangement in advance.
