Valuation is arguably the most hotly contested issue in litigation. This is because there are so many factors to consider when valuing assets. And, each type of asset has a different methodology to follow. Consequently, fraud and forensic accounting experts are needed to decipher which and when the applicable standards should be followed. More importantly, fraud examiners are needed in the arenas in which these valuations take place, such as shareholder/partner disputes, matrimonial disputes, bankruptcy, and insolvency cases.
The purpose of a valuation dictates the standard of value to be used. While the standard of value used for a valuation may seem straight forward to many, there is plenty of room for variation in the application of that standard. One valuation analyst’s opinion or conclusion of value will most always be different from any other valuation analyst’s. Because of that fact, it is crucial to have the right forensic accounting expert on your side to dissect every component of a valuation.
The definition of value starts to vary even more with intangible assets. A good example is goodwill. In several states, “personal goodwill” and “entity goodwill” are treated differently per applicable law. Since personal goodwill cannot be transferred to another person, the value of that goodwill is removed from any asset, such as a business, that is divisible. A forensic accountant is needed to quantify the overall value of the asset and then ascertain the amount that should be allocated to personal versus entity goodwill. As you can expect, this contentious intangible asset is frequently litigated, and is successfully done so with the right forensic and valuation expert.