Business Valuation

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Intangible Assets in Business Valuation: What They Are And Why They Matter

railways in a train station close-up photography

Some objects are easy to count and measure: money, rare artifacts, glittering diamonds and generous hunks of gold. Things get much trickier when you can’t simply weigh the valuable item on a scale or assign it a quantitative value. Such items are called intangible assets. In this article, we will explore in more detail what intangible assets are and how they are measured.

What Qualifies As An Intangible Asset?

What makes an intangible set valuable is that it provides some tangible economic value. This value might not be readily apparent just by reviewing a business’s records.

To give you an idea of what an intangible asset is, here are some common examples:

  • Trademarks
  • Copyrights
  • Lease Agreements
  • Employment Contracts
  • Franchises
  • Customer Lists
  • Computer Software
  • Noncompetition Agreements
  • Goodwill
  • Licensing Agreements
  • Trade Secrets

Why Measure Intangible Assets?

Measuring intangible assets may seem like a futile endeavor, especially since they have no concrete numbers backing them up. But think of it this way: if you and your spouse run a business but one day decide you want to go your separate ways, you want to make sure that you can still hold on to what you have worked hard to create. That doesn’t just apply to the products that have already been crafted and placed on the shelf but also to future products that have not yet seen completion. A simple piece of paper like a patent can ensure that you can keep creating what you put work into making a reality.

How Are Intangible Assets Measured?

Intangible assets vary in function. As such, it doesn’t make sense to value a patent the same way you would a leasing agreement. What does help is to consider the following criteria when assessing the value of intangible assets:

  1. Market Demand. Ask yourself honestly: does the asset satisfy a present consumer need? If so, what is that need and what is a realistic price for the average consumer? 
  2. Income Potential. Of course, you’ll also want to consider how much money the asset can generate long-term. This can be hard to predict, which is why there are many different methods available for calculating intangible asset value. 
  3. Cost of Production. Sometimes, an idea may look incredibly lucrative on the surface. In many ways, it may be. Unfortunately, you may find out that the cost of producing a product outweighs what you earn from it in the end. Such factors should be taken into account when estimating the value of an intangible asset.

Need help from a team of experienced experts? We can help! Reach out to us at Miod and Company!

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Calculating Child Support Under California Guidelines

child

Most parents want to go above and beyond to care for their children. This is true whether Mom and Dad stay together or go their separate ways. That said, determining child support can feel like a daunting process, at least on the surface. 

Each state has its own regulations for calculating child support. In California, determining child support requires a complex calculation. This calculation is used to determine the financial support of a minor child, usually due to divorce or separation.

We’ll explain the basics of the California child support guidelines and how child support is calculated. 

 

California Child Support Guidelines 

 

The guidelines for child support in California are designed to offer one uniform calculation for determining how much of a parent’s income should go toward meeting a child’s basic needs. These guidelines are found under California Family Code, §§ 4050 to 4076 and take the following ideas into account:

  • The parents’ job is to care for their children, providing adequate food, shelter, and other resources to promote a reasonable quality of life. What a parent provides will depend on the parent’s financial situation.
  • Exceptions to the guideline are only used in special cases. 
  • Child support orders should be made to sufficiently provide for a child while also taking into account California’s high cost of living.
  • Both parents are responsible for supporting their children. 

 

Components Used to Calculate Child Support 

 

Child support takes into account many different factors, including: 

  • The gross income of each parent. A judge will look most closely at the net monthly disposable income of each parent. 
  • The percentage of time each parent spends with each child. 
  • Tax deductions the parents can claim. 
  • Child care costs either parent faces. 
  • Mandatory payroll deductions. 

The formula for calculating child support in California is:

CS= K (HN-H%)(TN)

  • CS= child support amount. This is the answer the calculation will give when you enter your information. 
  • K= The total allocation for child support of both parents’ income. 
  • HN= High net. This is the net monthly disposable income of the parent who earns more money. 
  • H%= The percentage of time the higher-earning parent has primary physical responsibility of the child. 
  • TN= Combined total net monthly disposable income of both parents. 

 

Exceptions to the Guideline Amount 

 

In most cases, the court will use the formula above to determine child support amounts in California. However, exceptions do exist. Family Code Section 4057(b) has the full list of factors that will allow deviations from the guideline. 

Consider this example. One parent may have a very high income. If the amount determined by the formula exceeds the need of the children, the judge may choose to award child support that’s lower than the formula. 

The calculation from the guideline above is used in California to determine child support. Ultimately, the formula considers the parents’ incomes, tax deductions for each parent, time spent with the child, and more to determine a fair child support amount. 

Need more guidance with matters concerning child support? 

We are happy to help!

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The 3 Biggest USPAP Changes for 2020-21

Every two years, the Uniform Standards for Professional Appraisal Practice, or USPAP, are updated. The latest version of USPAP applies to the 2021-2021 period. 

The major changes to USPAP in this update include changes to reports, certifications, and expectations of competency; most of these changes will have little impact on the appraisal process but are still worth taking note of in order to understand the heart of these standards. 

Here are three of the most major changes to USPAP for 2020-21:

 

1. Changes to Restricted Appraisal Reports

 

The first change to the USPAP to be aware of is perhaps the most significant. Restricted appraisal reports are appraisal reports containing fewer details than a full appraisal report and which were previously only available for use by the client. Now, they can now be used by individuals other than the client. 

These intended additional parties must be identified by name—they cannot be identified by a type, such as “bank”. This change creates new opportunities to utilize restricted appraisal reports where previously they would not have been usable.

 

2. Changes to Supplemental Certifications

 

The requirements for supplemental certifications have also been modified. Under previous versions of USPAP, if an assignment required a certification that did not contain every necessary element of an appraisal certification (such as the URAR and other forms), an additional certification featuring the signatures of the appraiser(s) was required in order to proceed.

These additional certifications are still required, but for the 2020-21 version of the USPAP, the Appraisal Standards Board clarified that the appraiser(s) signatures are not required on the supplemental certifications.

 

3. Changes to the Competency Rule

 

This alteration of the standards seems minor, and it’s true that it won’t have a particularly huge impact on the standard processes of appraisal. However, it’s still something to be aware of.

This change saw a comment from the Standards Rule 1-1 move from the development standards to the Competency Rule. The comment, which reads “Perfection is impossible to attain, and competence does not require perfection”, now applies to all aspects of the appraisal process, beyond development and reporting and on to all other pieces of appraisal practice.

Understanding the USPAP is critical to maintaining USPAP compliance. These three changes are not the only differences between this version of USPAP and previous versions, but they are the most major and important to understand for any appraiser.

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