| Course and Examination
Format
PART 3: Application of Business
Valuation Concepts to Bankruptcy and other Distressed Situations
A course of study designed to provide the
CIRA with a comprehensive understanding of how to apply the principles
and concepts of business valuation in bankruptcy and other distressed
situations.
The course of study for Part 3 will involve
advance preparation consisting of reading assignments and answering of
multiple choice questions from the course material. The material will
be mailed four weeks prior to the class. The three-and-one-half-day course
will consist of three days of instruction, with a three-hour exam on the
fourth day.
Requirements to take Part 3:
| 1. |
Successfully complete Part 1 (or
received an approved waiver).
|
| 2. |
Successfully complete Part 2(or received an approved
waiver).
Individuals who do not meet the requirements of
both Part 1 and 2 may attend Part 3, but they are not eligible for
certification.
Part 2 will be waived for those applicant that
have one of the following certifications: ASA-Business Valuation;
CBA; CFA; CPA/ABV; CVA/AVA.
|
Course content
| Standard of Value/Premise of Value |
| |
- Bankruptcy Code and statutes
- Court interpretations and decisions
|
| Cost of Capital – Equity |
| |
- Applicability of CAPM in distress situations
- Alternative options for estimating cost of equity
in distress situations
- Applicability of historical beta in restructuring/bankruptcy
- Estimating unsystematic risk in distress/bankruptcy
|
| Cost of Capital – Debt |
| |
- Estimating synthetic ratings
- Applicability of YTM bond calculations
- When to use an after-tax cost of debt
|
| Weighted Average Cost of Capital |
| |
- Identify an optimal capital structure
- Inapplicability of WACC with a changing capital
structure
|
| Income Approach |
| |
- Additional cash flow considerations for companies
in distress and/or bankruptcy
- How and when to apply the adjusted present value
method
- Incorporating the potential truncation of cash
flows
- Assessing potential tax implications of cancellation
of debt (COD) income and the rights to net operating losses (NOLs)
under transfer of ownership
|
| Market Approach |
| |
- Selecting appropriate comps for distressed companies
- Calculating market value of invested capital
for distressed companies
- Applicable similar transactions
|
| Asset Approach |
| |
- Identification and valuation of assets/potential
recoveries
- Identification and valuation of liabilities/claims
- Incorporation of wind-down costs
- Liquidation analysis for disclosure statement
|
| Applications in Bankruptcy |
| |
- Plan of reorganization
- Adequate protection
- Claims determination
- Recovery actions and solvency analysis
|
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