Note Regarding Valuations of Businesses Performed Just Prior to the COVID-19 Pandemic

Pugh CPAs performs annual valuations, most recently with an effective date of December 31, 2019, for many of its clients who then use those valuation reports to set the prices for transactions occurring in the coming year.  We have seen a number of questions arising as to whether these valuations should be retroactively adjusted now that we are seeing potential changes in revenues, expenses, and risk associated with the COVID-19 Pandemic.

To address these concerns, we rely upon the professional standards promulgate by the AICPA when considering the subsequent events (i.e., events indicative of conditions not known or knowable as of the valuation date, including conditions that arose subsequent to the valuation date).  As of December 31, 2019, there were no reported cases of COVID-19 in the U.S. an no mainline discussions that the novel coronavirus would lead to a global pandemic.  Given these facts, we believe that valuations as of December 31, 2019 should not be updated.  However, it may make sense to move the valuation date forward if the purpose is to support an upcoming transaction to better reflect market conditions at the time the transaction is negotiated.

If you have questions or more like more information, please contact our business valuation expert, Michael Harvey.   Again, our offices are closed to clients and visitors but our team is available by email or phone.

Until we see you next or speak to you, stay safe!

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