David Larson, Duff and Phelps

The World of fair market value exists because of two sections in the ASC, numbers 946 and 820 which state “An investment company shall measure its investments in debt and equity securities subsequently at ‘fair value’” and “Fair value is the price that would be received TO SELL an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” respectively.  These two sections allow us to use fair market value for investments and came about because fair market value was and is an important topic

To find fair market value, accounting and financial staff go through a complex process that starts out with looking at your ebitda from the last twelve months.  They then make any needed adjustments for the future quarter with information that they have about the coming months.  After a series of comparisons with other companies and taking into account multiple factors, they reach a number that they deem fair market value.

David gave us many real world situations to show us that it is difficult to come up with a fair market value.  He wanted to show us that to be good at valuation it would take some additional studying, but that it is also a rewarding career path.  He stated, “The best part of our profession is the challenge; that is why we are respected. It is a complicated field that is exciting, requires a lot of judgment and is a great career.