Uncategorized
August 23, 2012
A recent divorce case that went before the North Dakota Supreme Court emphasizes just how important it is to work with a certified appraiser when questions of asset value or business value arise. In this case, the value of the husband’s orthodontic practice was in question, in addition to spousal support issues. Both the husband and wife in this case supplied expert witnesses to testify to the value of the practice. In the end, the court preferred the business valuation put forth by certified appraiser, who was the husband’s expert. The wife’s expert was an attorney who conducted appraisals for brokering sales of dental practices, but was not a certified appraiser.
When making its findings on the value of the orthodontic practice, the court relied on the appraisal supplied by husband’s certified appraiser and made a few adjustments. The court stated that it considered the husband’s appraisal to be more accurate because the appraiser conducted the appraisal according to the Uniform Standards of Professional Appraisal Practice (USPAP).
The certified appraiser testified that the USPAP standards are consistent with Internal Revenue Service rulings on valuing closely held businesses, like the orthodontic practice. Using an income approach, his valuation provided a fair market value of the stock of the orthodontic practice, which is organized as an S Corporation. He considered the tangible and intangible assets, earnings, and debt of the practice to complete a stock valuation.
The court considered the appraiser’s method of determining the value of intangible assets a critical factor in finding his appraisal more accurate. The court found the prior sale was a “truly comparable sale” because it was an arm\’s-length transaction, with a willing seller and buyer of the
same practice in the same market. The court found the amount the husband paid for the practice\’s intangible assets could be relied upon to accurately determine their fair market value.
A non-certified appraisal can be anything, including just a piece of paper with a company letterhead, and a list of items and prices. So beware. Though it’s entirely possible that a non-certified appraisal can have the same information as a certified appraisal, there’s one extremely important consideration: A certified appraisal will stand up to peer, IRS, and court scrutiny, whereas a non-certified appraisal will not. Contact EquipNet to learn more about our wide-range of Valuation Services.
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Tags: appraisals certified machinery and equipment appraisal valuation,
