The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals.


Time Will Tell: Diverging Perspectives on BDC Portfolio Values

We observed last spring that 2015 would likely mark a turning point in portfolio valuations with the degree of difficulty likely to increase during the year. With Q4 earnings season beginning, we take an opportunity to check in on portfolio marks and market sentiment over the year. The key takeaway from the year is that the valuation perspectives of investors and portfolio managers began to diverge.

Lands’ End and Trade Name Impairment

Last week, Lands’ End, Inc. (NASDAQ: LE) announced that it would write down the value of its flagship trade name asset (Lands’ End). Management’s preliminary guidance is for a charge of $90 million to $110 million, which could lower the asset’s value by 20% from $528 million to $418 million. Obviously, a non-cash impairment charge is just that, non-cash, but what does it mean for stakeholders and how is such a charge actually determined?

Dimon Was Spot on Last Week

“Yes it is going to be ugly, but the financial world should not end solely because ultra-low rates engineered by the Fed led to a speculative lending boom in the energy sector that few noticed until it was too late.”

A Guide to Reviewing a Purchase Price Allocation Report

A purchase price allocation report should be well documented, concise, and provide sufficient background information. This post enumerates elements of a properly prepared purchase price allocation report.

Valuation of Customer-Related Assets

Customer relationships form a key intangible asset for firms operating in many industries. Firms devote significant human and financial resources in developing, maintaining and upgrading customer relationships. In some instances, supply or customer contracts give rise to identifiable intangible assets. More broadly, however, customer related intangible assets consist of the information gleaned from repeat transactions, with or without underlying contracts. Firms can and do lease, sell, buy or otherwise trade such information, which are generally organized as customer lists.

The Appraisal Practices Board of The Appraisal Foundation originally released a discussion draft of a document entitled “The Valuation of Customer-Related Assets” in June 2012. The draft, authored by the Working Group on Customer-Related Assets, provides best practices guidance on the valuation of customer-related intangible assets. A subsequent exposure draft was released in December 2013. A final version of the document is pending. This article, drawing in part from these documents, examines attributes of customer-related intangible assets and their valuation.

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