CDBV 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.

CDBV Part 3 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

CDBV Experience Forms