Page 32 - Business Valuation for Estates & Gift Taxes

b. Purpose and intended use of the valuation

c. Intended users of the valuation

d. Identity of the subject entity

e. Description of the subject interest

f. Whether the business interest has ownership control characteristics and its degree of marketabil-
ity

g. Valuation date

h. Report date

i. Type of report issued

j. Applicable premise of value

k. Applicable standard of value

l. Assumptions and limiting conditions

m. Any restrictions or limitations in the scope of work or data available for analyses

n. Any hypothetical conditions used in the valuation engagement, including the bases for their use

o. If the work of a specialist was used in the valuation engagement, a description of how the spe-
cialist’s work was relied upon

p. Disclosure of subsequent events in certain circumstances

q. Any application of the jurisdictional exception

r. Any additional information the valuation analyst deems useful to enable the user(s) of the report
to understand the work performed.

The analyses and descriptions of the subject entity's finances and operations should include recent bal-
ance sheets, income statements, and cash flow statements, if available. Furthermore, the analyses should
incorporate, to the extent available, historical financial statements for a look-back period that is suffi-
cient enough to allow identification of entity-specific trends.

The detailed valuation report should also include a discussion of the industry and economic trends and,
ideally, supportable and relevant reasons for the trends, rather than a simple recitation of the facts or
boilerplate descriptions. The purpose of this is to help develop the valuation analyst’s assessment of the
entity’s future outlook which is especially important if a company is valued using an income or a market
approach. Forecasts and exit multiples must be reasonable and supportable. If a valuation analyst can
show correlations or other kinds of relationships between the entity and external micro and macro influ-
ences, this information can be used to explain an entity’s potential in the future and ultimately a step in
the right direction for establishing a well-supported conclusion of value.

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