During litigation cases, there are often situations where an attorney needs to work with a forensic accountant or other financial expert to determine the value of several types of assets. This can include large assets, such as businesses or business shares, or smaller items, such as the value of stocks or other marital assets. Depending on the circumstances surrounding the case and the available information, it may not be possible or ideal for an expert to conduct a formal business or asset valuation. Under these circumstances a calculation of value report (CVR) can be completed to arrive at a calculated value. CVRs are often used for strategic planning, estimating economic damages and during litigation. The reduced cost and reporting requirements make CVRs a more appealing solution for many attorneys, companies and individuals, although there are limitations. To help clients, prospects and others understand calculation of value reports and their benefits, DiGabriele, McNulty, Campanella & Co. has provided a summary of key details below.

Key Differences Between CVRs and Valuations

A calculation of value report is different from an appraisal or full valuation because the financial professional is not arriving at a detailed conclusion of asset value, complete with a full appraisal report; rather they estimate the value of an asset through limited investigation and other procedures.

When using a CVR instead of a full valuation, the valuations methods are discussed and agreed upon between the client and provider prior to engagement commencement. This means that the valuation professional can only use the agreed upon framework to arrive at a value amount. Additional work outside of the agreed upon scope are not permitted. The limited nature of CVRs also means that the amount of reporting is significantly reduced. Finally, it's important to note that a CVR does not state the value of a business or other asset; it is simply the conclusion of the applied valuation methodologies. 

When is a Calculation of Value Report Appropriate?

There are many instances when it is more practical to use a CVR over a formal business or asset valuation, including:

  • Economic Damage Calculations – When determining the economic loss to a company arising from various circumstances.
  • Business Planning Purposes – Strategic business planning, including tax and estate planning, and for planning the purchase of a business or business interest.
  • Sale of Business – Commonly used to help a business owner establish an initial asking price and negotiate when placing a business on the market for sale.
  • Litigation Procedures – Generally used in the settlement stage of cases involving divorce, transactions or other litigation proceedings.

It's important to note that calculation of value reports are generally not admissible in court (Merion Capital v 3M Cogent), although in rare cases they have been deemed permissible (such as Ward v Ward in part because of lack of scope restrictions), and there is no rule against testifying based on a calculation of value.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.