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THE JUDGE WOULDN’T IGNORE THIS “ROUNDING ERROR”

June 2017 | Issue 86 Background Constellis Group,  Inc. is a private security firm.  In December 2013, the Company formed an Employee Stock Ownership Plan (“ESOP”), which purchased 100% of Constellis’s voting stock.  Wilmington Trust NA was named Trustee of the ESOP.  Less than a year after the ESOP was created, the ESOP sold all […] More...

NEW JERSEY COURT USES VALUATION DISCOUNT TO PUNISH “BAD BOY”

March 2017 | Issue 85 Introduction Richard and Steven Parker are brothers who ran a flower business in Scotch Plains, New Jersey.  Richard is the President of Parker Interior Plantscapes (“PIP”), which installs and services plants and flowers in commercial settings.  Steven is the President of Parker Wholesale Florists (“PWF”), which is a garden center.  […] More...

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...

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Fresh Start Accounting Valuations

Generally, upon emergence from Chapter 11 of the U.S. Bankruptcy Code, a company’s balance sheet is required to be restated to fair value, in accordance with the principles of fresh start accounting.   AICPA SOP 90-7 states that the reorganization value of an entity adopting fresh start accounting should be allocated to the entity’s assets in conformity with the procedures specified by Statement of Financial Accounting Standards No. 141R.  SFAS 141R requires the reorganization value to be allocated to its assets and liabilities based on their fair values.

The steps involved include estimation of reorganization value, allocation of reorganization value and goodwill to various reporting units, and estimation of the fair value of tangible and intangible assets.  The assets to be valued include inventory, real property, machinery and equipment, technology, customer relationships, trade names and goodwill.