The Barson Group

Volume 12 - Issue 1                                                             

Winter, 2013                                                                                  

                

                                                           

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We Have Gone Green.  All issues are e-only!!

 
In This Edition
The Perpetuity Fallacy
Focus on Fun
Quick Links
  
  
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Hot Off the Presses!

 

Our newest mini-book

 

NEW BOOK 
 

 

If you haven't received your complimentary copy, please contact Laura Johnson  laura@barsongroup.com; 908-203-9800 ext 103

 

 

               

The Perpetuity Fallacy

  

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In business valuation, especially for small and medium-sized businesses, without question the most common approach to valuation is the income approach; and the most common way that is done is by the CPA valuation expert determining the normalized income and then capitalizing same.  We capitalize same by applying a capitalization rate (cap rate) to the normalized income.  For any of our readers who are not quite familiar with that phrase, essentially a cap rate is the inverse of a multiple - for instance, a cap rate of 20% means a multiple of 5; a cap rate of 25% means a multiple of 4. 

 

There are several steps in the development of the cap rate, several factors to be considered.  There is a mix of objective and subjective factors that are part of the process.  This article will deal with one of the key subjective factors - the growth rate.  Furthermore, in respect to the growth rate, this article's focus is on the issue that is sometimes raised when a "high" rate of growth is chosen by the expert - which then at times results in a challenge along the lines of a growth rate of that magnitude into perpetuity results in a simply untenably large valuation.  That issue often is blown far out of proportion to what it really is - and that further, it is often a non-issue.  The perpetuity fallacy is often raised as a theoretical bogeyman that has far more bark than bite. 
 
Click To Read The Entire Article

 

 

 

 Focus on Fun

 

Accountants & Humor

A Sociological Fable

 

Just because a deduction is outrageous doesn't mean it's automatically disallowed. Cynthia Hess, a Green Bay, Wisconsin stripper known as "Chesty Love" claimed a $2,088 deduction for implants that enlarged her bust size. The IRS turned down her claim. She appealed. Special Trial Judge Joan Seitz Pate ruled that the result of the implants was to increase Hess' income. She allowed the deduction.

 

 

Click Here For More 'Focus on Fun'

 

 

    
 

The BARSON GROUP  is proud to announce the publication of

 

"Divorce: The Accountant as Financial Expert" 

 by Kalman A. Barson, CPA/ABV, CFE, CFF 

 

 AICPA BOOK COVER

 

***We are delighted to announce that the book is in its second printing!***

 

This is Kal's 6th text focusing on divorce related accounting services, including investigative accounting, business valuations, funds flow tracing and related issues.  While its primary audience is fellow CPAs, as well as attorneys practicing family law and judges sitting in the family section of the court, it is written in such a fashion so that it would be readily understood by the general lay public.  All royalties have been assigned to three charities devoted to helping women and children.

 

Kal's book can be purchased directly through the AICPA - www.cpa2biz.com/divorce    

 

 

Our Mini-Books: 

 

Reading & Understanding Tax Returns, Financial Issues in Divorce Practice; Business Valuation - The Basics; The Majesty & Glory of Unreported Income; Divorce, It Can Get Personal - Life Style Analysis & Related Matters - complimentary copies for the asking.  Contact us if you haven't received your copy.