Business Valuation Methods

Some Basics on Value Measurements

As one of the top Albuquerque accounting firms, we find ourselves often confronted with questions of valuation. The different ways the IRS and other authorities value various assets are not always consistent.  Valuation professionals decide which measurement to use for a business valuation from various authoritative standards including court orders, case law, administrative law, or statutes of states or federal laws. A company’s documents, buy-sell agreements, articles of incorporation, or the like might also specify the method to use. The valuator may also use professional judgment in making this decision. Because of this, a valuation professional who is qualified and experienced is important when choosing one to hire. It can make a difference in whether or not evidence is accepted in court.

The most commonly used measurement of value is fair market value.  If you are trying to value a business interest for gift or estate tax, this is what you will probably use. Other valuation methods may include investment value, intrinsic value, or some other standard.  According to the IRS, fair market value is defined as, “the price at which the property would change hands between a hypothetical buyer and seller who have reasonable knowledge of the relevant facts and are under no compulsion to enter into the transaction.”

Fair market value is the price for which an exchange would likely happen if transacted on the valuation date. Fair market value is the value for the best use of that property on that date, considering all uses available realistically. This amount does not change regardless of the use chosen for the property.

Valuation methods can be complicated without the proper skills.  We, as an Albuquerque accounting firm with years of experience can help shed some light on this issue.

Firm Profile:  Hinkle + Landers, CPAs is one of Albuquerque New Mexico’s leading accounting firms.  Hinkle + Landers, CPAs has been operating for over 40 years in Albuquerque as well as all parts of New Mexico.  Hinkle + Landers, CPAs also provides audit, fraud and forensic accounting services as well as tax preparation and bookkeeping in Albuquerque New Mexico.

Sara Heppler is a Staff Accountant at Hinkle + Landers, PC 

Hinkle + Landers, PC, one of the leading Albuquerque CPAs and accounting firms, stays up to date on news that has an impact on the accounting industry and our community. The Previous blog is by Sara Heppler, a staff accountant of Hinkle + Landers, PC on things for business valution methods or business consulting to consider when accounting in Albuquerque.