Valuation for Financial Reporting - CMA Ankur Pandey

PrefaceThe second edition of this book is about fair value in financial reporting, with primaryemphasis on fair value, its measurements and reporting, and the valuation andimpairment analysis of intangible assets and goodwill. Chapter 1 discusses theobjectives of financial reporting and the recent Financial Accounting StandardsBoard (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, FairValue Measurements, from the perspective of the valuation specialist. In addition,Chapter 1 describes work done by academic researchers on the relevance of fairvalue accounting.This book is designed to bring practical implementation guidance to what is now achallenge for CFOs, auditors, and other CPAs in the private and public sectors.Because of the requirements for financial reporting of intangible assets and goodwill,auditors and valuation analysts will not only have to focus on determining the fairvalues of assets in accordance with SFAS No. 157 and SFAS No. 141, Business Combinations(and its upcoming replacement), they also must assess on at least an annualbasis whether impairment of those assets has occurred in accordance with SFAS No.142, Goodwill and Other Intangible Assets and SFAS No. 144, Accounting for the Impairmentor Disposal of Long-Lived Assets. This book will explain the valuationaspects of the new financial reporting requirements, including how to identify the distinguishingcharacteristics of goodwill and identifiable intangible assets, determine ifimpairment has occurred, and employ specific methods to assess the financial impactof such impairment.In later chapters, readers are provided a detailed example of a business combinationin which tangible and intangible assets are identified and the values measured. Adetailed example of an impairment analysis is also provided. The case study coversthe determination of fair value or assets and reporting units under SFAS Nos. 141,142, 144, and 157.Significant issues related to SFAS No. 142 are addressed, including treatment ofpreviously identified but unbooked intangible assets subsumed in goodwill, whatconstitutes a reporting unit, and how to handle synergies resulting from the businesscombination and subsequent impairment.We have included two sample valuation reports, a checklist for data gathering, anda work program designed to guide the valuation analyst through the maze of methodologiesthat may be employed in the determination of the value of intangibles.We have also included an analysis of the valuation industry’s reporting standardswith cross-referencing among the various organizations. In-process research anddevelopment (IPR&D) receives special attention, with the inclusion of the AmericanInstitute of Certified Public Accountants (AICPA) Model Audit Program that delineatesprocedures to be considered when auditing a business combination transactionthat may include the purchase of IPR&D.ix