Normalization vs. Abnormalization Adjustments in Valuation – Why When What How and How Not **Webinar 51 Broadcast Date: June 26, 2012**
Jim Hitchner, CPA/ABV/CFF, ASA with Jim Alerding, CPA/ABV, ASA, CVA
One of the most important and sensitive value drivers in any valuation is normalization adjustments to income in both the income and market approaches. There are also normalization adjustments made to various assets in the net asset approach. This session examines the issues surrounding normalization adjustments including:
- Why should normalization adjustments be made?
- What normalizations adjustments are appropriate?
- How are such adjustments determined and supported?
- How do you avoid and identify “abnormalization” adjustments?
- Define and discuss the major purposes for using normalization adjustments
- Define and discuss the use of normalization adjustments in the income, market and net asset approaches
- How to support legitimate normalization adjustments
- How to attack abnormalization adjustments
Discuss the types and sources of information for normalization adjustments including:
o Control vs. minority
o Ownership characteristics
o GAAP departures, extraordinary, nonrecurring and unusual items
o Nonoperating assets and liabilities
o Depreciation and amortization
o Standard and premise of value
o Unrecorded assets and liabilities
o Capital structure
o Discounts for lack of marketability and control
o Control premiums
o Discount, capitalization and growth rates
- The Participant will learn the use and implementation of normalization adjustments when using any of the three approaches to value
- The Participant will learn to identify the types of normalization adjustments and sources of information for them
- The Participant will learn when to use or when not to use control normalization adjustments
- The Participant will learn the categories of normalization adjustments and their uses and purposes
Included in this downloadable archived webinar package:
- Audio/Video file
- Webinar transcript
- Original Webinar handouts
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