When it comes to Oil & Gas reserve valuations, PV10 value does not equal the actual fair market value of an asset. Many factors, such as volumetric risk, required rates of return, future pricing, inflation, capital costs, and taxes can all work together to discount the fair market reserve value of an oil & gas asset by as much as 30% to 60% below the PV10. Unfortunately, many investors and their legal/financial advisors assume that PV10 and FMV are equivalent, and therefore make improper or inaccurate investment decision or transfers between business entities. Don’t let this happen to you…call ValueScope to see how an accurate valuation of assets can save you money and time with respect to Oil & Gas reserve valuations and critical decisions.
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In the US, most courts require expert witnesses to prove damage amounts with “reasonable certainty.” In other words, has the plaintiff’s expert presented sufficient evidence to make a fair estimate of damages? To offer an opinion under Rule 702, an expert must satisfy the court that his or her opinion is:
• Guided by principles, and
• Methods are regularly applied by others damages experts
Reasonable certainty means that profits that form the basis of economic damages need not be absolutely certain in order to calculate damages that have a reasonable basis. The question is: do “uncertain” profits differ from “certain” profits? Neither court nor jury is required to attain “certainty” in awarding damages; and this is just as true with respect to “value” as with respect to “profits.” Note that “uncertain profits” or “speculative value” are each a characterization of the evidence and not a classification of profits or value.
Reasonable certainty in damages cases is a question of whether the plaintiff has evidence and can value the impact by the probability of success. There is a borderline between permissible speculations to that of intolerable guesswork. A damage calculation need not prove that all elements are certain, but such calculations must be:
• Moored in facts
• Use sound methodologies
• Yield reasonable results
This Video outlines the rules, factors and guidelines for what is considered reasonable certainty.
In June of 2015, the Office of Inspector General (OIG) released an alert declaring certain physician compensation agreements that exceed fair market value may violate federal fraud statutes and be subject to stiff financial penalties and prosecution. To ensure compliance and protection from financial penalties and/or litigation, a comprehensive review of all existing and future compensation arrangements should be performed by a qualified and experienced appraiser like ValueScope. Our team includes experienced economists (PhDs, MSs, and MBAs), Certified Public Accountants, Chartered Financial Analysts, and Certified Valuation Analysts. We are active members in the National Society of Certified Healthcare Business Consultants and the Medical Group Management Association.
Feel free to call us at 817.481.6350 or visit our website at http://www.valuescopeinc.com
The Issue: Despite the OECD’s efforts to present a set of guidelines about transfer pricing aspects of business restructuring, taxpayers are still not always clear about their options, especially when trying to avoid disputes. The OECD is continuing its work on various BEPS (base erosion and profit shifting) action plan items as participating countries debate competing views and expectations regarding how the BEPS action items should be implemented. Transfer pricing documentation remains a topic of central importance and interest for stakeholders, with the OECD’s proposed country-by-country reporting being a central feature (and central area of concern) for the new guidelines.
Consequences:Corporate restructuring is undertaken by companies for a number of reasons, usually commercial, and there is often a tax benefit involved in doing so. However, there may also be a tax cost to a restructuring.
What Needs to be Done:
The fundamental tenet of transfer pricing (IRC Section 482) is that related parties shall transact at arm’s length, implying that a related party transaction should reflect similar economic substance to a transaction undertaken with a third, or unrelated, party.