<i>Book Review</i>: Understanding Standards of Value In Depth

Standards of Value: Theory and Applications, written by Jay E. Fishman, Dr. Shannon P. Pratt, and William J. Morrison, addresses the standard of value as applied in four distinct contexts: estate and gift taxation, shareholder dissent and oppression, divorce and financial reporting. The book is written in a fashion that will prove useful for judges, lawyers and practitioners to better understand the theory and conceptual underpinnings related to the various standards of value in both judicial and regulatory applications. The depth of the book in several areas reaches well beyond anything published to date with respect to how the recognized standards of value relate to these four very different purposes in application.

Standards of Value leaves valuation approaches and techniques to the well-recognized treatises that have come before it, including several by the authors themselves, such as Valuing a Business and the PPC Guide to Business Valuation. After an exhaustive discussion of the definitional aspects of both fair value and fair market value, the book moves forward with a detailed discussion on the origins of fair market and fair value reaching back to the early 1800s and progressing to the current accepted definitions for each of the standards discussed within the book.

Separate chapters focus on standards of value concepts related to:

• Common Standards and Premises of Value;
• Fair Market Value in Estate and Gift Tax;
• Fair Value in Shareholder Dissent and Oppression;
• Standard of Value in Divorce; and
• Fair Value in Financial Reporting

Using as its two fundamental premises 'Value to the Holder' and 'Value in Exchange,' the book provides a scaffold for incisively discussing the attributes and nuances of the full spectrum of standard measures. The book goes on to provide an in-depth analysis of each of the five recognized standards: fair market value, investment value, intrinsic value, fair value as applied to state actions and fair value for financial reporting purposes.

An extensive amount of research went into Standards of Value, as evidenced by the detailed case law references included throughout the book. The 'Standards in Divorce' chapter has the best summary of state-by-state case law I have seen to date, and this alone will make the book an indispensable resource for anyone who practices in matrimonial courts. This chapter offers excellent insights on the nuances of personal versus enterprise goodwill, covenants not to compete, celebrity goodwill and the value of professional licenses. One interesting discussion highlights the courts' broad interpretation of 'equitable distribution,' which often leads to results that appear inconsistent with established standards.

The chapter on shareholder dissent and oppression thoroughly discusses precedents for fair-value determinations as determined by the ABA and American Law Institute. Similar to the divorce chapter, this fair-value chapter extensively references case law and provides an equally impressive state-by-state summary. The latter categorizes, among other aspects, the recognized state case law, definitions of fair-value terms, and applicable state statutes addressing triggering events. A separate chart in this chapter recaps, on a state-by-state basis, the primary case law supporting or rejecting the ability to take discounts on fair-value determinations.

These well-recognized authors have clearly done their homework in producing Standards of Value: Theory and Applications. This book, with its relatively easy-to-reference state case law summaries, will prove a welcome addition to the library of anyone who practices in or deals with business appraisal issues.

Standards of Value: Theory and Applications, written by Jay E. Fishman, Dr. Shannon P. Pratt, and William J. Morrison, addresses the standard of value as applied in four distinct contexts: estate and gift taxation, shareholder dissent and oppression, divorce and financial reporting. The book is written in a fashion that will prove useful for judges, lawyers and practitioners to better understand the theory and conceptual underpinnings related to the various standards of value in both judicial and regulatory applications. The depth of the book in several areas reaches well beyond anything published to date with respect to how the recognized standards of value relate to these four very different purposes in application.

Standards of Value leaves valuation approaches and techniques to the well-recognized treatises that have come before it, including several by the authors themselves, such as Valuing a Business and the PPC Guide to Business Valuation. After an exhaustive discussion of the definitional aspects of both fair value and fair market value, the book moves forward with a detailed discussion on the origins of fair market and fair value reaching back to the early 1800s and progressing to the current accepted definitions for each of the standards discussed within the book.

Separate chapters focus on standards of value concepts related to:

• Common Standards and Premises of Value;
• Fair Market Value in Estate and Gift Tax;
• Fair Value in Shareholder Dissent and Oppression;
• Standard of Value in Divorce; and
• Fair Value in Financial Reporting

Using as its two fundamental premises 'Value to the Holder' and 'Value in Exchange,' the book provides a scaffold for incisively discussing the attributes and nuances of the full spectrum of standard measures. The book goes on to provide an in-depth analysis of each of the five recognized standards: fair market value, investment value, intrinsic value, fair value as applied to state actions and fair value for financial reporting purposes.

An extensive amount of research went into Standards of Value, as evidenced by the detailed case law references included throughout the book. The 'Standards in Divorce' chapter has the best summary of state-by-state case law I have seen to date, and this alone will make the book an indispensable resource for anyone who practices in matrimonial courts. This chapter offers excellent insights on the nuances of personal versus enterprise goodwill, covenants not to compete, celebrity goodwill and the value of professional licenses. One interesting discussion highlights the courts' broad interpretation of 'equitable distribution,' which often leads to results that appear inconsistent with established standards.

The chapter on shareholder dissent and oppression thoroughly discusses precedents for fair-value determinations as determined by the ABA and American Law Institute. Similar to the divorce chapter, this fair-value chapter extensively references case law and provides an equally impressive state-by-state summary. The latter categorizes, among other aspects, the recognized state case law, definitions of fair-value terms, and applicable state statutes addressing triggering events. A separate chart in this chapter recaps, on a state-by-state basis, the primary case law supporting or rejecting the ability to take discounts on fair-value determinations.

These well-recognized authors have clearly done their homework in producing Standards of Value: Theory and Applications. This book, with its relatively easy-to-reference state case law summaries, will prove a welcome addition to the library of anyone who practices in or deals with business appraisal issues.