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The Professional's Guide to Fair Value: The Future of Financial Reporting

Book Description

An all-encompassing guide to the elements and basics of fair value

With the important role fair value is playing in the creation of a converged set of global accounting standards, demand for products in this category is growing spectacularly. The elements and basics of fair value are covered, including risk, dealing with the SEC, and details on legal responsibility. In addition, sample financial statements are included, along with tables, recommended applicable techniques, and management checklists for those who are responsible for preparing and approving of financial statements.

  • Written by the Chairman and co-CEO of the International Association of Consultants, Valuators and Analysts (IACVA)

  • Includes sample financial statements of both U.S. and foreign companies

  • Appropriate for anyone involved professionally with finance—managers, accountants, investors, bankers, instructors, and students—The Professional's Guide to Fair Value is a reliable reference on the ins and outs of fair value financial disclosure.

    Table of Contents

    1. Cover
    2. Series
    3. Title Page
    4. Copyright
    5. Dedication
    6. Preface
    7. Acknowledgments
    8. 1: Significance of Value
      1. BUSINESS USES FOR VALUATION
      2. MERGERS AND ACQUISITIONS
      3. FINANCIAL REPORTING
      4. INVESTMENT BANKERS VERSUS VALUATORS
      5. VALUATION REQUIREMENTS
      6. LITIGATION RISKS
      7. TEN COMMANDMENTS OF VALUATION
    9. 2: Fair Value Concept
      1. RELEVANT PRONOUNCEMENTS
      2. DEFINITIONS
      3. MARKET PARTICIPANTS
      4. FAIR VALUE ACCOUNTING
      5. REVALUATION UNDER IFRS
      6. OTHER TYPES OF VALUE
      7. VALUATION PRINCIPLES
      8. REPORTING AND CASH-GENERATING UNITS
    10. 3: Fair Value Framework
      1. STAGE 1: DETERMINE THE UNIT OF ACCOUNT
      2. STAGE 2: EVALUATE THE PREMISE OF VALUE
      3. STAGE 3: ASSESS THE PRINCIPAL MARKET
      4. STAGE 4: ESTABLISH THE MOST ADVANTAGEOUS MARKET
      5. STAGE 5: SELECT APPROPRIATE VALUATION METHODS
      6. STAGE 6: ESTIMATE FAIR VALUE CONCLUSIONS
    11. 4: Taming the Future
      1. DEFINITIONS
      2. EFFECT OF MARKET PARTICIPANTS' ASSUMPTIONS
      3. SCENARIO ANALYSIS
      4. SCENARIO IMPLICATIONS
    12. 5: Projecting What Is to Come
      1. BASE THE FUTURE ON THE PAST
      2. THE TRUTH IS IN THE PARTS
      3. AVOID UNNECESSARY RISKS
      4. GARBAGE IN, GARBAGE OUT
      5. BELIEVABLE AND LIKELY CONCLUSIONS
      6. QUALITY OF EARNINGS
      7. CONCLUSION
    13. 6: The Market Approach to Fair Value
      1. NATURE OF MARKETS
      2. CLASSIFYING ASSETS
      3. COMPARABLE TRANSACTIONS
      4. GUIDELINE ENTITIES
      5. GUIDELINE ENTITIES EXAMPLE
      6. LICENSED ASSET EXAMPLE
      7. CONCLUSION
    14. 7: The Cost Approach to Fair Value
      1. CURRENT REPLACEMENT COST
      2. DEDUCTIONS
      3. INTEGRATING THE FACTORS
      4. RESIDUAL VALUE
      5. USEFUL LIVES
      6. VALUING INTANGIBLE ASSETS BY THE COST APPROACH
      7. CONCLUSION
    15. 8: The Income Approach to Fair Value
      1. CAPITALIZATION METHODS
      2. INCOME APPROACH—DISCOUNTING
      3. TERMINAL AMOUNTS
      4. APPLICATION TO INTANGIBLE ASSETS
    16. 9: Sources of Value—Profits
      1. STRUCTURE OF BUSINESSES
      2. INNOVATION
      3. DUPONT ANALYSES
    17. 10: Sources of Value—Risks
      1. REDUCING RISKS
      2. CONTINUAL MONITORING AND TESTING
      3. DEALING WITH BIASES
      4. RISK RATE COMPONENT MODEL
      5. INTELLECTUAL CAPITAL VALUE DRIVERS
      6. CONCLUSION
    18. 11: Valuing Liabilities
      1. LIABILITIES TRANSFERRED RATHER THAN SETTLED
      2. ASSET RETIREMENT OBLIGATIONS
      3. CONTINGENT LIABILITIES
    19. 12: Business Combinations
      1. DO MERGERS PAY OFF?
      2. WHY MERGE?
      3. DETERMINATION OF SYNERGIES
      4. INTRINSIC AND INVESTMENT VALUES
      5. QUANTIFICATION
    20. 13: Purchase Price Allocation
      1. STAGE 1: DETERMINE THE ACQUIRER
      2. STAGE 2: ESTABLISH THE CONSIDERATION'S FAIR VALUE
      3. KNOWLEDGE OF THE INDUSTRY
      4. STAGE 3: IDENTIFY ALL THE ITEMS INVOLVED
      5. STAGE 4: SELECT APPROPRIATE VALUATION TECHNIQUES
      6. STAGE 5: ESTIMATE FAIR VALUES AND RECONCILE RATES OF RETURN
      7. CONCLUSION
    21. 14: Impairment
      1. REPORTING UNITSs
      2. CASH-GENERATING UNITS
      3. GOODWILL
      4. ALLOCATIONS
      5. GAAP LONG-LIVED ASSETS IMPAIRMENT TEST
      6. IFRS IMPAIRMENT TEST
      7. GAAP GOODWILL IMPAIRMENT TEST
    22. 15: The Auditor's Blessing
      1. AUDITING FAIR VALUES
      2. CONCLUSION
    23. About the Author
    24. index