Stallone Fights Studio’s Accounting Methods

Louis J. Cercone, CPA, CFE, CFF, ABV, ASA, CVA

Contracts that include contingent consideration can lead to disputes regarding key definitions, as well as the amount and timing of payouts. Here are the details of a high-profile accounting dispute that started more than two decades ago between Sylvester Stallone's production company and a major movie studio involving the 1993 movie Demolition Man.

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A Written Report Can Validate an Experts Method

Douglas P. Sosnowski, CPA/ABV, ASA, CFF

Expert witness testimony can sometimes make or break a case. But if your financial expert is unable to survive a Daubert challenge, the court may not be presented with critical evidence that could otherwise help prove (or dispute) damages or value. A recent federal district court case shows how a comprehensive written report can demonstrate that experts used proven financial theories and techniques to arrive at their conclusion.

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Business Structure

View the Business Structure chart which shows the "Income tax differences based on business structure" to compare the tax treatment for pass-through entities vs. C corporations.

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Measure Owners’ Compensation With the Independent Investor Test

Douglas P. Sosnowski, CPA/ABV, ASA, CFF

The U.S. Tax Court recently addressed the issue of reasonable compensation. This is a subjective matter that is closely related to replacement compensation for shareholder disputes and divorce cases. Here, we list five factors to consider when determining reasonable compensation and explain how experts use the independent investor test to support their positions with objective market evidence. The independent investor test can also be used to determine replacement compensation.

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Delaware Court Relies on Merger Price in Appraisal Rights Case

Louis J. Cercone, CPA, CFE, CFF, ABV, ASA, CVA

A fundamental question in dissenting shareholder cases is: Does merger price provide an accurate estimate of fair value? To find the answer, courts often consider the negotiation process and relationships between the seller and prospective buyers. A recent Delaware appraisal rights case demonstrates how valuation experts can help evaluate price, as well as calculate alternative fair value estimates using other approaches.

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Goodwill Impairment Testing May Soon Be Easier

Louis J. Cercone, CPA, CFE, CFF, ABV, ASA, CVA

Reporting goodwill in business combinations and testing it for impairment can be confusing — and often requires the use of outside valuation professionals. Here's why investors are concerned about impairment and what changes are coming soon to the goodwill accounting rules. We'll also discuss a recent study that reports a substantial increase in impairment losses among U.S. public companies.

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Valuations Are Critical When Using FLPs to Transfer Wealth

Douglas P. Sosnowski, CPA/ABV, ASA, CFF

Family limited partnerships allow you to transfer assets — such as marketable securities, private business interests and real estate — to the next generation. Limited partner interests may warrant substantial discounts for lack of control and marketability from the fair market value of the partnership's underlying assets. Here's a recent case in which an interest in an FLP was valued at just $14 million, even though the interest's pro rata share of the FLP's assets was valued at $61.5 million.

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