January 06, 2016
Women's Wear Daily quotes Ron Friedman, national leader of Marcum's Retail & Consumer Products group, about calculating fair market value.
The clock is ticking for Iconix Brand Group Inc. and its previous top management, led by former chief executive officer Neil Cole. The company has until June to complete a refinancing of its $300 million debt obligation — and will have to do it with the specter of a formal Securities and Exchange Commission investigation, stock price fall, management turmoil, shareholder lawsuits alleging securities law violations and a string of earnings restatements casting shadows over its operations.
There have been other reporting instances that bring into question how realistic, and reasonable, some of the company's estimated projections might be. Take the February 2014 transaction where Iconix paid $42 million to buy back the 50 percent stake in its rights in Latin America for certain brands it sold to Falic Group in 2012 for $10 million. The company posted a $37.9 million noncash gain, instead of a $32 million loss, after revaluing the fair market value of the "new" acquisition. That revaluation boosted the value of the 50 percent interest that Iconix owned before the reacquisition of the stake it sold to Falic.
That's where calculating fair market value can be an art form that's truly subjective, according to Ron Friedman, who heads up the national retail and consumer products industry group at national accounting and consulting firm Marcum LLP. "Valuations for goodwill, which can be trademarks, can increase. You have to do an analysis that includes a projection on cash flow based on what [one] thinks the potential revenue will be. It's an estimate. And one can make an estimate on projected licenses, even if they are not signed yet," Friedman said.
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