JAY E. FISHMAN, FASA, is coauthor or contributing author of seven professional books. He is a managing director of Financial Research Associates, a regional business valuation and forensic accounting firm. He has conducted hundreds of business valuations and has qualified as an expert witness and provided testimony in several federal and state courts. SHANNON P. PRATT is one of the most successful and respected authors in the field of business valuations. He has written many industry standard texts. Over a distinguished career spanning more than four decades, he has performed valuation engagements for M&As, ESOPs, and numerous other purposes. Dr. Pratt is CEO of Shannon Pratt Valuations, a business valuation firm located in Portland, Oregon. WILLIAM J. MORRISON, CPA, ABV, CFF, is a partner at WithumSmith+Brown, a regional mid-Atlantic CPA firm, and is frequently appointed by the courts as a valuation expert. He has published articles on forensic accounting and valuation. He is a former FBI agent and has conducted thousands of forensic accounting investigations and business valuations of closely held companies.

• Foreword xiiiPreface xviiAcknowledgments xxiAbout the Authors xxvIntroduction 1Purpose 1Every Appraisal is Unique 3Fair Value versus Fair Market Value 4Historical Perspective 5Chapter Preview 8Chapter 1: Common Standards and Premises of Value 8Chapter 2: Fair Market Value in Estate and Gift Tax 8Chapter 3: Fair Value in Shareholder Dissent and Oppression 9Chapter 4: Standards of Value for Partnership and Limited Liability Company Buyouts 10Chapter 5: Standards of Value in Divorce 12Chapter 6: Fair Value in Financial Reporting 13How Standard of Value Can Affect the Ultimate Conclusion of Value 13Chapter 1 Common Standards and Premises of Value 17Common Standards and Premises 17Price, Value, and Cost 17Defining a Standard of Value 19Premises of Value 20Common Standards of Value 21Fair Market Value 21Fair Value 23Investment Value 24Intrinsic Value 25Book Value 27Common Operational Premises Underlying the Standard of Value 28Going Concern 28Liquidation Value 29Fair Value in Alternative Contexts 30Fair Market Value in Alternative Contexts 31Standards of Value in the International Context 32Summary 33Chapter 2 Fair Market Value in Estate and Gift Tax 35Introduction 35Common Definitions of Fair Market Value 36History of Fair Market Value 37United States v. Fourteen Packages of Pins 38Elements of Fair Market Value 41Price at Which a Property Would Change Hands 42Willing Buyer 44Willing Seller 54No Compulsion to Buy or Sell 59Reasonable Knowledge of Relevant Facts 63Common Discounts 80Summary 87Chapter 3 Fair Value in Shareholder Dissent and Oppression 89Gilbert E. Matthews and Michelle PattersonFair Value as the Standard of Value in Dissent, Oppression, and Entire Fairness Cases 89The Appraisal Remedy for Dissenting Shareholders 94History and Overview of the Appraisal Remedy 94Appraisal Rights Today 97Appraisal Rights in Publicly Traded Corporations: The Market Exception 99Fair Value Can Be Less Than Arms’-Length Price 102The Oppression Remedy 106Development of the Oppression Remedy 106Context of Oppression Remedy 107Dissolution as a Remedy for Oppression 110Shareholder Buyouts as an Alternative Remedy 110Examples of Oppression 116Fair Value is the Standard of Value in Appraisal and Oppression in Almost All States 121Fair Value as Defined by Various Authorities and Statutes 121The Valuation Date—Before the Effectuation of the Corporate Action to Which the Shareholder Objects 125Valuation Date in Appraisal Cases 125Valuation Date in Oppression Cases 126Customary and Current Valuation Techniques 130Fair Value in Delaware 139Delaware Fair Value Standards 139Entire Fairness in Delaware 140Components of Fair Value in Delaware 144Ohio’s Unique and Unfavorable Standard of Value in Appraisals 155Fair Value Normally Excludes Discounts and Premiums 157Most States Now Reject Minority and Marketability Discounts 157Levels of Value 159Discounts at the Shareholder Level 160The “Implicit Minority Discount” 163No Premiums Are Applicable to DCF Values 167Discounts at the Corporate Level 168Control Premiums at the Corporate Level 169Some States Permit Considering Extraordinary Circumstances in Determining Whether to Apply Discounts 171Court Decisions Have Moved toward Rejecting Discounts 172Equitable Adjustments to Fair Value 188Consideration of Wrongdoing in Calculating Fair Value 188Damage Claims 193Summary 194Chapter 4 Standards of Value for Partnership and Limited Liability Company Buyouts 197Noah J. GordonIntroduction 197Buyout upon Dissociation 198Buyout in Lieu of Dissolution 199Dissenters’ Rights 200Partnerships and Limited Liability Partnerships (LLPs) 200Limited Liability Partnerships 201General Partnership Standard of Value Cases 212Limited Partnerships 216Limited Liability Companies, Generally 222Uniform Acts 223Buyout in Lieu of Dissolution 224Withdrawal and Buyout 228Dissenters’ Rights 231Professional LLCs 232LLC Decisions 232Summary 235Chapter 5 Standards of Value in Divorce 237Introduction 237Marital Property: General Background and History 240Identification of Marital Property and Separate Property 242Relationship between Valuation and Identification of Intangible Assets 244Appreciation on Separate Property 246Premises and Standards of Value in Divorce 249Premises of Value 249Standards of Value 250Premises of Value Revealed through the Valuation of Insurance Agencies 255Concepts of Value under the Two Premises 257Standards of Value in Divorce among the 50 States 258Lack of Statutory Insight 258Revealing Standard of Value through Case Law 260Toward a Standard of Value Classification System 265Value in Exchange 274Goodwill 274Lack of Control and Marketability Discounts under Value in Exchange 290Fair Value 293Buy–Sell Agreements under Value in Exchange 299Value to the Holder 304Goodwill 304Double Dipping 315Shareholder-Level Discounts under the Value to the Holder Premise 317Fair Value 317Buy–Sell Agreements under Value to the Holder 318Summary 320Chapter 6 Fair Value in Financial Reporting 323Neil J. BeatonIntroduction 323Fair Value in Financial Reporting: What is It? 324Application of Fair Value 325History of Fair Value in U.S. Accounting Literature 328Application of the Fair Value Standard to Business Combinations 333Application of the Fair Value Standard to Asset Impairment Tests 336Interpretation of Fair Value Compared to Other Standards of Value 339Fair Value in Financial Reporting versus Fair Value in Dissenters’ Rights Cases 339Fair Value in Financial Reporting versus Investment Value 339Fair Value in Financial Reporting versus Fair Market Value 340Audit Issues 342Summary 343Appendix: Sources of Information 344Appendix A International Business Valuation Standards 347Introduction 347International Valuation Standards Council 347Valuation Organization 348Broad Definitions 350Approaches to Valuation 351Types of Property 352Toronto Valuation Accord 353Mission and Objectives 354Definitions 355Fair Value Measurement 356Conclusion 357Royal Institute of Chartered Surveyors 358International Financial Reporting Standards 358Appendix B Chart— Fair Value in Dissent and Oppression 359Appendix C Standards of Value in Divorce Classifications by State and Standard of Value 377Index 443

JAY E. FISHMAN, FASA, is coauthor or contributing author of seven professional books. He is a managing director of Financial Research Associates, a regional business valuation and forensic accounting firm. He has conducted hundreds of business valuations and has qualified as an expert witness and provided testimony in several federal and state courts. SHANNON P. PRATT is one of the most successful and respected authors in the field of business valuations. He has written many industry standard texts. Over a distinguished career spanning more than four decades, he has performed valuation engagements for M&As, ESOPs, and numerous other purposes. Dr. Pratt is CEO of Shannon Pratt Valuations, a business valuation firm located in Portland, Oregon. WILLIAM J. MORRISON, CPA, ABV, CFF, is a partner at WithumSmith+Brown, a regional mid-Atlantic CPA firm, and is frequently appointed by the courts as a valuation expert. He has published articles on forensic accounting and valuation. He is a former FBI agent and has conducted thousands of forensic accounting investigations and business valuations of closely held companies.

• Foreword xiiiPreface xviiAcknowledgments xxiAbout the Authors xxvIntroduction 1Purpose 1Every Appraisal is Unique 3Fair Value versus Fair Market Value 4Historical Perspective 5Chapter Preview 8Chapter 1: Common Standards and Premises of Value 8Chapter 2: Fair Market Value in Estate and Gift Tax 8Chapter 3: Fair Value in Shareholder Dissent and Oppression 9Chapter 4: Standards of Value for Partnership and Limited Liability Company Buyouts 10Chapter 5: Standards of Value in Divorce 12Chapter 6: Fair Value in Financial Reporting 13How Standard of Value Can Affect the Ultimate Conclusion of Value 13Chapter 1 Common Standards and Premises of Value 17Common Standards and Premises 17Price, Value, and Cost 17Defining a Standard of Value 19Premises of Value 20Common Standards of Value 21Fair Market Value 21Fair Value 23Investment Value 24Intrinsic Value 25Book Value 27Common Operational Premises Underlying the Standard of Value 28Going Concern 28Liquidation Value 29Fair Value in Alternative Contexts 30Fair Market Value in Alternative Contexts 31Standards of Value in the International Context 32Summary 33Chapter 2 Fair Market Value in Estate and Gift Tax 35Introduction 35Common Definitions of Fair Market Value 36History of Fair Market Value 37United States v. Fourteen Packages of Pins 38Elements of Fair Market Value 41Price at Which a Property Would Change Hands 42Willing Buyer 44Willing Seller 54No Compulsion to Buy or Sell 59Reasonable Knowledge of Relevant Facts 63Common Discounts 80Summary 87Chapter 3 Fair Value in Shareholder Dissent and Oppression 89Gilbert E. Matthews and Michelle PattersonFair Value as the Standard of Value in Dissent, Oppression, and Entire Fairness Cases 89The Appraisal Remedy for Dissenting Shareholders 94History and Overview of the Appraisal Remedy 94Appraisal Rights Today 97Appraisal Rights in Publicly Traded Corporations: The Market Exception 99Fair Value Can Be Less Than Arms’-Length Price 102The Oppression Remedy 106Development of the Oppression Remedy 106Context of Oppression Remedy 107Dissolution as a Remedy for Oppression 110Shareholder Buyouts as an Alternative Remedy 110Examples of Oppression 116Fair Value is the Standard of Value in Appraisal and Oppression in Almost All States 121Fair Value as Defined by Various Authorities and Statutes 121The Valuation Date—Before the Effectuation of the Corporate Action to Which the Shareholder Objects 125Valuation Date in Appraisal Cases 125Valuation Date in Oppression Cases 126Customary and Current Valuation Techniques 130Fair Value in Delaware 139Delaware Fair Value Standards 139Entire Fairness in Delaware 140Components of Fair Value in Delaware 144Ohio’s Unique and Unfavorable Standard of Value in Appraisals 155Fair Value Normally Excludes Discounts and Premiums 157Most States Now Reject Minority and Marketability Discounts 157Levels of Value 159Discounts at the Shareholder Level 160The “Implicit Minority Discount” 163No Premiums Are Applicable to DCF Values 167Discounts at the Corporate Level 168Control Premiums at the Corporate Level 169Some States Permit Considering Extraordinary Circumstances in Determining Whether to Apply Discounts 171Court Decisions Have Moved toward Rejecting Discounts 172Equitable Adjustments to Fair Value 188Consideration of Wrongdoing in Calculating Fair Value 188Damage Claims 193Summary 194Chapter 4 Standards of Value for Partnership and Limited Liability Company Buyouts 197Noah J. GordonIntroduction 197Buyout upon Dissociation 198Buyout in Lieu of Dissolution 199Dissenters’ Rights 200Partnerships and Limited Liability Partnerships (LLPs) 200Limited Liability Partnerships 201General Partnership Standard of Value Cases 212Limited Partnerships 216Limited Liability Companies, Generally 222Uniform Acts 223Buyout in Lieu of Dissolution 224Withdrawal and Buyout 228Dissenters’ Rights 231Professional LLCs 232LLC Decisions 232Summary 235Chapter 5 Standards of Value in Divorce 237Introduction 237Marital Property: General Background and History 240Identification of Marital Property and Separate Property 242Relationship between Valuation and Identification of Intangible Assets 244Appreciation on Separate Property 246Premises and Standards of Value in Divorce 249Premises of Value 249Standards of Value 250Premises of Value Revealed through the Valuation of Insurance Agencies 255Concepts of Value under the Two Premises 257Standards of Value in Divorce among the 50 States 258Lack of Statutory Insight 258Revealing Standard of Value through Case Law 260Toward a Standard of Value Classification System 265Value in Exchange 274Goodwill 274Lack of Control and Marketability Discounts under Value in Exchange 290Fair Value 293Buy–Sell Agreements under Value in Exchange 299Value to the Holder 304Goodwill 304Double Dipping 315Shareholder-Level Discounts under the Value to the Holder Premise 317Fair Value 317Buy–Sell Agreements under Value to the Holder 318Summary 320Chapter 6 Fair Value in Financial Reporting 323Neil J. BeatonIntroduction 323Fair Value in Financial Reporting: What is It? 324Application of Fair Value 325History of Fair Value in U.S. Accounting Literature 328Application of the Fair Value Standard to Business Combinations 333Application of the Fair Value Standard to Asset Impairment Tests 336Interpretation of Fair Value Compared to Other Standards of Value 339Fair Value in Financial Reporting versus Fair Value in Dissenters’ Rights Cases 339Fair Value in Financial Reporting versus Investment Value 339Fair Value in Financial Reporting versus Fair Market Value 340Audit Issues 342Summary 343Appendix: Sources of Information 344Appendix A International Business Valuation Standards 347Introduction 347International Valuation Standards Council 347Valuation Organization 348Broad Definitions 350Approaches to Valuation 351Types of Property 352Toronto Valuation Accord 353Mission and Objectives 354Definitions 355Fair Value Measurement 356Conclusion 357Royal Institute of Chartered Surveyors 358International Financial Reporting Standards 358Appendix B Chart— Fair Value in Dissent and Oppression 359Appendix C Standards of Value in Divorce Classifications by State and Standard of Value 377Index 443

JAY E. FISHMAN, FASA, is coauthor or contributing author of seven professional books. He is a managing director of Financial Research Associates, a regional business valuation and forensic accounting firm. He has conducted hundreds of business valuations and has qualified as an expert witness and provided testimony in several federal and state courts. SHANNON P. PRATT is one of the most successful and respected authors in the field of business valuations. He has written many industry standard texts. Over a distinguished career spanning more than four decades, he has performed valuation engagements for M&As, ESOPs, and numerous other purposes. Dr. Pratt is CEO of Shannon Pratt Valuations, a business valuation firm located in Portland, Oregon. WILLIAM J. MORRISON, CPA, ABV, CFF, is a partner at WithumSmith+Brown, a regional mid-Atlantic CPA firm, and is frequently appointed by the courts as a valuation expert. He has published articles on forensic accounting and valuation. He is a former FBI agent and has conducted thousands of forensic accounting investigations and business valuations of closely held companies.

• Foreword xiiiPreface xviiAcknowledgments xxiAbout the Authors xxvIntroduction 1Purpose 1Every Appraisal is Unique 3Fair Value versus Fair Market Value 4Historical Perspective 5Chapter Preview 8Chapter 1: Common Standards and Premises of Value 8Chapter 2: Fair Market Value in Estate and Gift Tax 8Chapter 3: Fair Value in Shareholder Dissent and Oppression 9Chapter 4: Standards of Value for Partnership and Limited Liability Company Buyouts 10Chapter 5: Standards of Value in Divorce 12Chapter 6: Fair Value in Financial Reporting 13How Standard of Value Can Affect the Ultimate Conclusion of Value 13Chapter 1 Common Standards and Premises of Value 17Common Standards and Premises 17Price, Value, and Cost 17Defining a Standard of Value 19Premises of Value 20Common Standards of Value 21Fair Market Value 21Fair Value 23Investment Value 24Intrinsic Value 25Book Value 27Common Operational Premises Underlying the Standard of Value 28Going Concern 28Liquidation Value 29Fair Value in Alternative Contexts 30Fair Market Value in Alternative Contexts 31Standards of Value in the International Context 32Summary 33Chapter 2 Fair Market Value in Estate and Gift Tax 35Introduction 35Common Definitions of Fair Market Value 36History of Fair Market Value 37United States v. Fourteen Packages of Pins 38Elements of Fair Market Value 41Price at Which a Property Would Change Hands 42Willing Buyer 44Willing Seller 54No Compulsion to Buy or Sell 59Reasonable Knowledge of Relevant Facts 63Common Discounts 80Summary 87Chapter 3 Fair Value in Shareholder Dissent and Oppression 89Gilbert E. Matthews and Michelle PattersonFair Value as the Standard of Value in Dissent, Oppression, and Entire Fairness Cases 89The Appraisal Remedy for Dissenting Shareholders 94History and Overview of the Appraisal Remedy 94Appraisal Rights Today 97Appraisal Rights in Publicly Traded Corporations: The Market Exception 99Fair Value Can Be Less Than Arms’-Length Price 102The Oppression Remedy 106Development of the Oppression Remedy 106Context of Oppression Remedy 107Dissolution as a Remedy for Oppression 110Shareholder Buyouts as an Alternative Remedy 110Examples of Oppression 116Fair Value is the Standard of Value in Appraisal and Oppression in Almost All States 121Fair Value as Defined by Various Authorities and Statutes 121The Valuation Date—Before the Effectuation of the Corporate Action to Which the Shareholder Objects 125Valuation Date in Appraisal Cases 125Valuation Date in Oppression Cases 126Customary and Current Valuation Techniques 130Fair Value in Delaware 139Delaware Fair Value Standards 139Entire Fairness in Delaware 140Components of Fair Value in Delaware 144Ohio’s Unique and Unfavorable Standard of Value in Appraisals 155Fair Value Normally Excludes Discounts and Premiums 157Most States Now Reject Minority and Marketability Discounts 157Levels of Value 159Discounts at the Shareholder Level 160The “Implicit Minority Discount” 163No Premiums Are Applicable to DCF Values 167Discounts at the Corporate Level 168Control Premiums at the Corporate Level 169Some States Permit Considering Extraordinary Circumstances in Determining Whether to Apply Discounts 171Court Decisions Have Moved toward Rejecting Discounts 172Equitable Adjustments to Fair Value 188Consideration of Wrongdoing in Calculating Fair Value 188Damage Claims 193Summary 194Chapter 4 Standards of Value for Partnership and Limited Liability Company Buyouts 197Noah J. GordonIntroduction 197Buyout upon Dissociation 198Buyout in Lieu of Dissolution 199Dissenters’ Rights 200Partnerships and Limited Liability Partnerships (LLPs) 200Limited Liability Partnerships 201General Partnership Standard of Value Cases 212Limited Partnerships 216Limited Liability Companies, Generally 222Uniform Acts 223Buyout in Lieu of Dissolution 224Withdrawal and Buyout 228Dissenters’ Rights 231Professional LLCs 232LLC Decisions 232Summary 235Chapter 5 Standards of Value in Divorce 237Introduction 237Marital Property: General Background and History 240Identification of Marital Property and Separate Property 242Relationship between Valuation and Identification of Intangible Assets 244Appreciation on Separate Property 246Premises and Standards of Value in Divorce 249Premises of Value 249Standards of Value 250Premises of Value Revealed through the Valuation of Insurance Agencies 255Concepts of Value under the Two Premises 257Standards of Value in Divorce among the 50 States 258Lack of Statutory Insight 258Revealing Standard of Value through Case Law 260Toward a Standard of Value Classification System 265Value in Exchange 274Goodwill 274Lack of Control and Marketability Discounts under Value in Exchange 290Fair Value 293Buy–Sell Agreements under Value in Exchange 299Value to the Holder 304Goodwill 304Double Dipping 315Shareholder-Level Discounts under the Value to the Holder Premise 317Fair Value 317Buy–Sell Agreements under Value to the Holder 318Summary 320Chapter 6 Fair Value in Financial Reporting 323Neil J. BeatonIntroduction 323Fair Value in Financial Reporting: What is It? 324Application of Fair Value 325History of Fair Value in U.S. Accounting Literature 328Application of the Fair Value Standard to Business Combinations 333Application of the Fair Value Standard to Asset Impairment Tests 336Interpretation of Fair Value Compared to Other Standards of Value 339Fair Value in Financial Reporting versus Fair Value in Dissenters’ Rights Cases 339Fair Value in Financial Reporting versus Investment Value 339Fair Value in Financial Reporting versus Fair Market Value 340Audit Issues 342Summary 343Appendix: Sources of Information 344Appendix A International Business Valuation Standards 347Introduction 347International Valuation Standards Council 347Valuation Organization 348Broad Definitions 350Approaches to Valuation 351Types of Property 352Toronto Valuation Accord 353Mission and Objectives 354Definitions 355Fair Value Measurement 356Conclusion 357Royal Institute of Chartered Surveyors 358International Financial Reporting Standards 358Appendix B Chart— Fair Value in Dissent and Oppression 359Appendix C Standards of Value in Divorce Classifications by State and Standard of Value 377Index 443