Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

LJN NewslettersNewsSectionsThe Matrimonial Strategist

Dangers of Relying on a Single-Period Capitalization Mode

BY Penny Lutocka
November 30, 2015

Frequently, matrimonial attorneys are presented with an “opinion” of marital asset value of a business equity from a CPA, appraiser or other financial professional, that seems rather basic. Following depositions, arguments often ensue as to the “reliability” of the value, how much effort was expended in the analysis, and whether the “conclusion of value” meets appropriate professional standards. The easiest model in valuation is a single-period capitalization methodology because there are few moving parts. In reality, however, the single period model encapsulates a whole variety of assumptions and estimates that are easy to manipulate but difficult to sustain. The biggest danger to matrimonial attorneys is that the valuation professional will only give this single-period model as the sole support for the opinion, seemingly ignoring other market evidence and asset/liability components. If this is the situation, the matrimonial attorney should understand how to attack the opposing expert, or seek support of his/her expert in a hearing to rehabilitate the expert following a cross-examination scrutiny.

Background

There are three approaches to valuing businesses: the income approach, market approach and asset approach. There are various methods within each of the approaches that the business appraiser can consider in performing a valuation. With perfect information, all methods will yield the “correct” value. Unfortunately, the expert's opinion of business value is necessary because of imperfect information.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Yachts, Jets, Horses & Hooch: Specialized Commercial Leasing Models Image

Defining commercial real estate asset class is essentially a property explaining how it identifies — not necessarily what its original intention was or what others think it ought to be. This article discusses, from a general issue-spot and contextual analysis perspective, how lawyers ought to think about specialized leasing formats and the regulatory backdrops that may inform what the documentation needs to contain for compliance purposes.

Hyperlinked Documents: The Latest e-Discovery Challenge Image

As courts and discovery experts debate whether hyperlinked content should be treated the same as traditional attachments, legal practitioners are grappling with the technical and legal complexities of collecting, analyzing and reviewing these documents in real-world cases.

Identifying Your Practice's Differentiator Image

How to Convey Your Merits In a Way That Earns Trust, Clients and Distinctions Just as no two individuals have the exact same face, no two lawyers practice in their respective fields or serve clients in the exact same way. Think of this as a "Unique Value Proposition." Internal consideration about what you uniquely bring to your clients, colleagues, firm and industry can provide untold benefits for your law practice.

Risks and Ad Fraud Protection In Digital Advertising Image

The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.

Turning Business Development Plans Into Reality Image

This article offers practical insights and best practices to navigate the path from roadmap to rainmaking, ensuring your business development efforts are not just sporadic bursts of activity, but an integrated part of your daily success.