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Valuations

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What is the Small Business Reorganization Act?

On August 23, 2019, a relatively small twenty-two-page bill, known as the Small Business Reorganization Act of 2018 (“SBRA”), was signed into law by the President of the United States.

The law would become effective six months later, February 19, 2020, only weeks before a worldwide pandemic was announced, that would bring the US economy to a halt.

What is the Small Business Reorganization Act

Risk Assessments in Valuation: More to Think About in Valuations during the Period of COVID-19. Comments and Points on Article in AICPA Review

As an appraiser for 25 years, I have found it presently a challenging time to do valuations for clients.  An appraiser’s goal is to deliver credible, supportable valuations that reflect one’s best unbiased professional  opinion on the value of the subject interest or company.  How do we achieve this goal when we do not know when the world will normalize from COVID-19? 

COVID-19 and its Impact on Real Property Appraisals

Nobody really saw it coming.  It was like a tsunami.  Few alive today can say they’ve lived through a pandemic.  Yes, we had heard about it.  We read stories coming from China, Korea, and Italy, but everyone was completely unprepared for this reality.  Shut down?  Everything?  Really?

As Bob Dylan put it, The Times They are a-Changin’

Dylan’s iconic song was an anthem for social and political change, a call for people to realize change will happen, no matter what. More than 45 years later, the lyrics are still relevant, especially in the estate and gift tax universe. That means individuals and business owners must be sure to update their estate planning arrangements to take advantage of current conditions. There have been a number of important developments that should be considered to design an estate or gifting plan that best suits individual needs.

Ownership Transfer

Owners of privately held companies are wise to document in an agreement the terms of any potential transfer of ownership, should a triggering event occur.  When a new company is formed, the founders rarely think about what could happen in 5 to 10 to 50 years.  Initially, everyone trusts everyone, and, of course, everyone will live forever.  Why should founders even think about a transfer of ownership?  All current members are in it for the long haul!

COVID-19, Economic Obsolescence and Your Assets’ Value

When appraising an asset, there are three types of depreciation to be considered, physical depreciation, functional obsolescence, and economic (external) obsolescence.

Physical depreciation is exactly what it sounds like. It is a decrease in property value due to physical wear and tear, deterioration, exposure to various elements, physical stress, the passage of time, and similar factors. Depending on the cost to cure, physical depreciation can be curable or incurable. Normally, physical deterioration is considered first.

Your Goodwill May Need Testing

With businesses currently struggling, expected revenue and profit levels are declining for many. If you carry goodwill on your balance sheet, this global economic decline may be a triggering event for testing goodwill for impairment, and this may be the time to do so. With high volatility in the stock market and an end date for COVID-19 Stay-at-Home just entering the discussion, experts cannot predict what the long-term economic implications will be on the value of your real estate, business, and other assets. We want our clients to know they have options.

Valuation Challenges During the COVID-19 Pandemic

Valuation is a combination of facts, data, and assumptions.   As part of the risk assessment process, the valuation analyst must consider contemporaneous conditions and ask “how is the company affected by this?” The COVID-19 pandemic is a highly unusual challenge to valuation professionals, as we don’t know how businesses and certain industries may react once restrictions are lifted and the economy is allowed to resume operations on a “normal” basis.

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