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Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

Future Expected Investment Strategy Determines Value of FLP Interest

January 2016 | Issue 83 The estate of Helen P. Richmond held a 23.44% interest in Pearson Holding Co. (“PHC”), a family investment company.  The estate valued this holding at $3,150,000, later adjusted to $5,046,000.  The IRS valued it at $7,330,000.  This difference of opinion was aired in US Tax Court in a case called Estate […] More...

Do Attached Strings Affect the Value of a Gift?

October 2015 | Issue 82 Steinberg v. Commissioner, 145 T.C. No. 7 (Sept. 16, 2015) explores how a contingent liability accepted by a donee can impact the value of a gift for gift tax purposes. Introduction In 2007, Petitioner Jean Steinberg, age 89, entered into a net gift agreement under which she gave her four […] More...

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Goodwill Impairments Up Dramatically

April 2009 | Issue 37

A recent study by PricewaterhouseCoopers LLP confirms what most observers would probably already suspect; that the number of goodwill impairments taken by corporations has soared in recent months. In particular, in the six-month period since the third quarter of 2008 through March 20, 2009, Fortune 500 companies have announced approximately $230 billion of impairments. This is more than twice the total of impairments recorded by Fortune 500 companies during the three years leading up to the third quarter of 2008.

An Impairment Perfect Storm
A goodwill impairment study under FAS 142 starts with a look at the value of a company as compared to its carrying value on the books. A sour stock market sets the stage for an impairment by reducing the apparent fair value of a company as compared to its book value. Add to this a further reduction in value due to earnings being battered by the recession and you have an impairment “perfect storm.”

As of March 20, 2009, 44% of publicly-traded Fortune 500 companies were trading at a price below book value. Of these companies, 52% have announced impairment charges since June 2008. Of the 56% of Fortune 500 companies trading above book value, 21% have recognized goodwill impairments.

Stock Market Shrugs Off Impairment Announcements
PWC also performed a study to determine the effect of the announcement of a goodwill impairment on a company’s stock price. Using a sample of S & P 1500 companies that had announced impairments during the first three months of 2009, and comparing their stock price movements to the movement of the S & P 500 stock index over the same period, they found that the impairment announcements typically had little impact on stock price. A copy of the PWC study is available here.