Now in a third edition,Valuation for Financial Reporting provides practical implementation guidance for practitioners, auditors, and their clients in the private and public sectors. This one-stop resource clearly explains SFAS 141R,Business Combinations; SFAS 160,Noncontrolling Interests in Consolidated Financial Statements; and SFAS 157,Fair Value Measurements. The new edition furthers the elements of fair value in financial reporting in accordance with recent standards, providing primary emphasis on fair value measurements and reporting, and the valuation and impairment analysis of intangible assets and goodwill.

Written by leading experts in the valuation field, theThird Edition features:Invaluable tools including flowcharts for SFAS 157 and SFAS 141R, a checklist for implementing the fair value measurement standard, and a preparers worksheetDiscussion of the valuation aspects of the new financial reporting requirements, including how to identify and measure contingent considerationsInterpretations of the accounting requirements with application of the requirements to specific facts and circumstancesSpecific guidance for determining fair value in a business combinationGuidance for determining fair value measurement, including fair value definition, transaction costs, transportation costs, market participants, and highest and best use

Now featuring an accompanying Website,Valuation for Financial Reporting, Third Edition is practical and easy to follow, with detailed examples of an impairment analysis as well as a business combination in which tangible and intangible assets are identified and valued. It is the authoritative reference every valuation professional must have.

MICHAEL J. MARD, CPA/ABV, ASA, is author or coauthor of seven books, includingFinancial Valuation Workbook, Second Edition and Driving Your Companys Value, both published by Wiley, as well as books on SFASs 141, 142, and 157. He is President of The Financial Valuation Group of Florida, Inc., and has testified in court approximately 100 times.

JAMES R. HITCHNER, CPA/ABV, ASA, is author ofFinancial Valuation, Second Edition andcoauthor of Financial Valuation Workbook, Second Edition, published by Wiley. He is Editor in Chief ofFinancial Valuation and Litigation Expert journal.

STEVEN D. HYDEN, CPA/ABV, ASA, is the coauthor of four books, including books on SFASs 141, 142, and 157. He is Chief Operating Officer of The Financial Valuation Group of Florida, Inc., and has developed analyses that have been reviewed and accepted by the Securities and Exchange Commission, major accounting firms, the IRS, and the courts.

Preface ix

Acknowledgments xi

About the Authors xiii

About the Website xvii

Chapter 1Fair Value Measurements and Financial Reporting: Financial Reporting and the Current Environment 1

Fair Value Measurements 6

Mark-to-Market Accounting 18

Notes 20

Appendix 1.1: Fair Value Flowchart 22

Chapter 2Business Combinations 29

Intangible Assets 29

Business Combinations 35

The Acquisition Method 36

Recognition and Measurement 41

Goodwill 53

Recording the Consideration Transferred 55

Disclosure 56

Notes 57

Appendix 2.1: Business Combination Flowchart 60

Appendix 2.2: Business Combination Overview 65

Appendix 2.3: Intellectual Property 66

Chapter 3Case Study 1: Determining the Value of Goodwill and Other Intangible Assets in a Business Combination 71

Consideration and Calculation of the Total of Intangible Assets and Goodwill 72

Business Enterprise Analysis 81

Valuation of Tangible Assets 88

Valuation of Intangible Assets 91

Valuation of Goodwill 122

Weighted Average Return on Assets 123

Disclosure 124

Notes 128

Chapter 4Noncontrolling Interests and Impairment 131

Noncontrolling Interests 131

Impairment 135

Notes 141

Chapter 5Case Study 2: Impairment Analysis 143

Valuation of Tangible Assets 155

Valuation of Intangible Assets 158

Conclusion 185

Notes 185

Chapter 6Implementation and Reference Aids 187

Business Valuation Reporting Standards 187

Reference Aids 197

Implementation Aids 235

Notes 267

Index 269