Financial Reporting

Financial ReportingOver the years reporting requirements have grown more and more involved for businesses. The Securities and Exchange Commission, the IRS and other entities have developed tomes of regulations to ensure that businesses deal in a fair and truthful way with investors, stakeholders and the public at large.

Often valuable in in ensuring the ethics and honesty of financial dealings, these regulations nonetheless have become quite a burden on companies. Highly specialized knowledge and experience is required in nearly every area of running a company to ensure that the financial reporting is being done correctly.

This is where BVC comes in. When a company’s accountant or lawyer tells the board that certain financial valuation reports are required, an expert is needed —a business valuation firm. BVC has this highly-specialized knowledge in order to ensure a company is satisfying regulatory requirements. We not only have that specialized knowledge but also decades of experience.

BVC delivers expert valuation services that fulfill all financial reporting requirements, satisfy CPAs and audit committees, and meet the compliance standards of the Securities and Exchange Commission, IRS and other regulatory agencies.

Business Combination Reporting Requirements

Mergers and acquisitions require special financial reporting before and after the transaction. Whenever businesses are combined, tax regulations and generally accepted accounting principles demand that the board engage in certain financial reporting, such as the preparation of a purchase price allocation.

Business combinations involve all classes of assets, both tangible and intangible, as well as liabilities. These transactions require performance of a purchase price allocation in accordance with ASC 805 (for companies reporting under US GAAP) or in accordance with IFRS 3R (for companies reporting under IFRS).

Necessary in order to create financial statements, a purchase price allocation is a method of accounting wherein the acquiring company allocates the purchase price of the acquired company into various assets and liabilities. The reporting is required by standard accounting procedures (ASC, IFRS, FASB, etc.)

This means that following a business combination, companies are required measure and report, as of the date of the acquisition, identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree.

Business Valuation Center is fully conversant with all the most exacting elements of financial reporting as covered by the following generally accepted accounting principles and tax regulations:

  • FASB ASC Topic 805, Business Combinations, which introduced significant changes over previous financial reporting standards
  • FASB ASC 820, Fair Value Measurements
  • FASB ASC 350, Impairment – Goodwill and Other
  • FASB ASC 852, Reorganizations
  • IFRS 3R, Business Combinations
  • IFRS 13, Fair Value Measurement
  • US Internal Revenue Code Section 1060

Asset Impairment Testing

Another element of standard financial reporting is impairment testing, meaning that companies must perform a standardized accounting assessment to determine whether their intangible assets have lessened in value since the last time they were appraised.

According to accounting rules under ASC 350 goodwill and certain intangibles are not amortized. Rather, these assets must be periodically tested for impairment.

They must test their goodwill for impairment at three different points in time. The first is the transitional test, which was required at the beginning of the fiscal year in which the Statement was adopted. In general, the valuation methods used for the transitional test must be consistent with all subsequent impairment testing. The second type of impairment testing is the interim test, which is required if certain “trigger events” occur, such as adverse changes in the business climate or market which might negatively impact the value of a reporting unit. Finally, companies must also perform annual tests for impairment.

The goodwill impairment tests are two-step processes. The Step One impairment test compares the fair value of a reporting unit to its carrying value. If the fair value exceeds carrying value there is no goodwill impairment and the test is complete. If not, impairment is indicated, requiring a Step Two impairment test. The Step Two test quantifies the amount of goodwill impairment.

Intangible Assets, Intellectual Property & Brands

In any transaction involving the acquisition of another company there is a need to make a purchase price allocation, which establishes the value of each of the assets that went to make up the purchase price. This has numerous uses in financial reporting.

Particularly in the tech sector, intangible assets can make up a very large part of a company’s worth. Intellectual property, brand value, patents, processes and goodwill all require specialized valuation techniques to ensure that they are adequately accounted for.

In all of our financial reporting services, BVC has hard-won expertise is the valuing of intangible assets. As one of the first companies to come up with methods of valuing internet companies during the early days of the dot-com boom, BVC is a pioneer in this field.

Regardless of how unique the intangibles are that you’re trying to value, BVC has the expertise and experience to deal with them correctly and arrive at a true value for the assets.

Private Equity Fund Reporting

Private equity funds have their own unique reporting requirements which require a very deep understanding of their particular needs.

As the primary valuation advisor for the Small Business Investment Company Program—with more than $24 billion invested in 4,500 companies – BVC was asked to author a comprehensive report on the current venture capital and private equity valuation methodologies. This report recommended significant revisions to SBA’s valuation guidelines. Most of the recommendations have been incorporated into the current set of SBA’s Valuation Guidelines for Small Business Investment Companies (SBICs) and related TechNotes.

Our specialized experience in this arena over many years has enabled us to become a recognized authority on the valuation standards used by the venture capital and private equity industry, including the following:

  • SBA’s Valuation Guidelines for Small Business Investment Companies (SBICs)
  • International Private Equity and Venture Capital Valuation Guidelines (IPEV)
  • Private Equity Industry Guidelines Group (PEIGG) Guidelines for Valuation of Private Equity Investments
  • Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820, formerly FAS 157)

In addition to providing valuation services to portfolio companies, BVC can assist general partners with their fund-level requirements, including:

  • Mark-to-market reporting for equity investments
  • Carried interest valuations for personal tax planning
  • Cross-fund transfers of portfolio companies
  • LP reporting and repurchase

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  • Read detailed case studies
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  • No cost or obligation.
  • Your information is held in strict confidence and no part of it is sold, transferred or given to any other organization.
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