Sunday, August 06, 2006
Courts Want Evidence of Valuation Expertise
Judges continue to expel experts (and their reports) when they are unable to demonstrate relevant credentials and experience. In a July 2006 case involving the fair market value assessment of private company equity, the U.S. Tax Court wrote: "We are not obligated to pay any regard to an expert opinion that lacks credibility" and criticized the report for not adhering to the Uniform Standards of Professional Practice, otherwise known as USPAP.
Within the last few weeks, the IRS released valuation guidelines, a product of the Valuation Policy Council. "The VPC was established in 2001 to assist IRS leadership in setting direction for valuation policy that cuts across functional lines, and in identifying process improvements to improve compliance and better utilize resources." (Click here for a copy of the new guidelines and here for a credential comparison chart.)
As pension funds increase their exposure to private company stock, the valuation issues are profound. The last thing pension fiduciaries should want is to pay someone to render an opinion of value and have the court toss it out for lack of substance. Ditto for regulatory enforcement and arbitration proceedings. posted by Susan Mangiero at 8/06/2006 08:00:00 AM
PENSION RISK MATTERSSM focuses on pension financial risk issues from a governance and fiduciary perspective. The goal is to identify important topics, ask thought-provoking questions, examine best practices and encourage meaningful debate about the $10 trillion global pension industry upon which millions of individuals depend. Author and consultant Susan M. Mangiero, Ph.D. is a CFA charter-holder, Accredited Valuation Analyst, Accredited Investment Fiduciary Analyst and certified Financial Risk Manager. Dr. Mangiero combines many years of experience in finance with a keen interest in solving problems and simplifying the complex (
