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Sample exam questions and updated information on the latest developments in the field for valuation candidates and professionals
A companion to Shannon Pratt’s Business Valuation Body of Knowledge, Second Edition or a stand-alone resource, the Business Valuation Body of Knowledge Workbook, Second Edition keeps ABV, ASA, CBA, and CVA candidates and current practitioners up to speed on the latest developments in this constantly changing discipline.
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Before embarking on a business valuation, it is essential to gain an understanding of the
legal and regulatory environment. Some aspects of the valuation may be mandated by statutory
and/or case law, such as the standard of value; other aspects may be influenced by the law, such
as the applicability of certain discounts or premiums.
It is important to understand the purpose of the valuation, that is, the use to which the valuation
will be put, because that will determine which laws and regulations govern the valuation.
Some valuations are governed by federal law and some by state law, which may vary widely
from state to state. Statutes apply for some valuations, but not for others. Binding precedential
case law exists for most valuations today but not for all.
Whatever the purpose of the valuation, it is subject to attack, both by regulatory authorities
and by parties to the transaction. Knowing and complying with the relevant laws and regulations
is essential to avoiding those attacks in the first place and to successfully defending against such
attacks should they occur.
1. Which of the following is/are governed by federal rather than state law?
a. Ad valorem (property) taxes
b. Corporate dissolutions
c. Dissenting stockholder suits
2. Which of the following Revenue Rulings relates to the excess earnings method?
3. Revenue Ruling 93-12 relates to which of the following?
a. Excess earnings method
b. Valuation of preferred stock
c. Discounts for lack of marketability
d. Family attribution
4. How many judgeships are on the U.S. Tax Court?
TRUE OR FALSE QUESTIONS
5. The Federal Rules of Evidence and the Federal Rules of Civil
Procedure are both legally binding. True False
6 Private Letter Rulings (PLRs) are issued at the taxpayer's request
regarding how the IRS will treat a proposed transaction. True False
7 The IRS Valuation Training for Appeals Officers Coursebook may
not be cited as authority. True False
8 Technical Advice Memorandums (TAMs) are released by the IRS
National Office and arise from questions raised by IRS personnel
during audits. True False
9. Revenue Rulings (RRs) have the force of law. True False
10. There can be only one value for a share of stock, regardless of the
purpose for which it is being valued. True False
11. The IRS has published business valuation guidelines. True False
12. The memorandums that provide nonbinding advice, guidance, and analysis in response to
questions from IRS agents, attorneys, and appeals officers on both substantive and procedural
issues are called:
Excerpted from Business Valuation Body of Knowledge Workbook
by Shannon P. Pratt
Copyright © 2003 by Shannon P. Pratt.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
|Part I.||Business Valuation Engagement Environment||1|
|1.||Business Valuation Legal and Regulatory Environment||3|
|2.||Business Valuation Professional Environment||5|
|3.||Business Valuation Engagement||8|
|4.||Litigation Service Engagements||11|
|Part II.||Terminology and Notation||13|
|5.||International Glossary of Business Valuation Terms||15|
|6.||Notation System Used in This Book||17|
|Part III.||Valuation Approaches and Methods||19|
|7.||Overview of Valuation Approaches and Methods||21|
|8.||Income Approach: Cost of Capital||23|
|9.||Income Approach: Discounting Method||30|
|10.||Income Approach: Capitalization Method||34|
|11.||Market Approach: Guideline Public Company Method||38|
|12.||Market Approach: Guideline Merger and Acquisition Method||41|
|13.||Prior Transactions, Offers, and Buy-Sell Agreements||45|
|14.||Adjusted Net Asset Method||47|
|15.||Excess Earnings Method||49|
|16.||Discounts and Premiums||51|
|17.||Reconciliation and Value Conclusion||55|
|Part IV.||Analysis of the Company||57|
|18.||Financial Statement Analysis||59|
|19.||Using Economic and Industry Data||64|
|20.||Site Visits and Interviews||67|
|Part V.||Supporting Data||69|
|21.||Sources of Supporting Data||71|
|Part VI.||Valuations for Specific Purposes||75|
|23.||Employee Stock Ownership Plans||79|
|24.||Shareholder Buyouts and Disputes||82|
|Part I.||Business Valuation Engagement Environment||87|
|1.||Business Valuation Legal and Regulatory Environment||89|
|2.||Business Valuation Professional Environment||90|
|3.||Business Valuation Engagement||91|
|4.||Litigation Service Engagements||93|
|Part II.||Terminology and Notation||95|
|5.||International Glossary of Business Valuation Terms||97|
|6.||Notation System Used in This Book||98|
|Part III.||Valuation Approaches and Methods||99|
|7.||Overview of Valuation Approaches and Methods||101|
|8.||Income Approach: Cost of Capital||102|
|9.||Income Approach: Discounting Method||105|
|10.||Income Approach: Capitalization Method||108|
|11.||Market Approach: Guideline Public Company Method||111|
|12.||Market Approach: Guideline Merger and Acquisition Method||112|
|13.||Prior Transactions, Offers, and Buy-Sell Agreements||113|
|14.||Adjusted Net Asset Method||114|
|15.||Excess Earnings Method||115|
|16.||Discounts and Premiums||117|
|17.||Reconciliation and Value Conclusion||119|
|Part IV.||Analysis of the Company||121|
|18.||Financial Statement Analysis||123|
|19.||Using Economic and Industry Data||125|
|20.||Site Visits and Interviews||126|
|Part V.||Supporting Data||127|
|21.||Sources of Supporting Data||129|
|Part VI.||Valuations for Specific Purposes||131|
|23.||Employee Stock Ownership Plans||134|
|24.||Shareholder Buyouts and Disputes||135|
|CPE Self-Study Examination||137|