indexindex - thomson reuters · 2019-06-05 · indexindex aa absolute risk & defined, 3-11...

INDEXINDEXAA

Absolute risk& defined, 3-11

Accounts receivable& sale of assets, 9-71

Acquisition& compulsory, following takeover bids& & appraisal rights, 7-100D& post& & levels of earnings/cash flow, 5-110B

Acquisition date& defined, 3-11

Adjusted cost base& defined, 3-11

Adjusted equity& defined, 3-11

Adjusted net book value& defined, 3-11& valuation technique, as, 5A-40

Advanced Tax Ruling& ATR-36, 9-31

Advisors (external)& utilizing, in corporate acquisitions, 5C-9

After-tax cash flow& indicated discretionary, 5A-68& & current results, 5A-69& & effect of income tax rates, 5A-68& & forecast earnings, 5A-70& & historic operating results and relatedadjustments, 5A-72

After-tax earnings& discretionary cash flow& & value conclusion, 5A-127& indicated from operations, 5A-68& & capitalization of, 5A-68& & coordination with business, industry andeconomic review, 5A-79& & current result, 5A-69& & forecast earnings, 5A-70& & & influence of external forces, 5A-71& & historic operating results and relatedadjustments, 5A-72& & inflation adjusted simple average, 5A-74

& & inflation adjusted weighted average,5A-75& & other considerations, 5A-77& pre-tax indicated earnings, 5A-68& selection of, 5A-65& & forecast period, 5A-66& & inflation, inclusion (exclusion) of, 5A-67& & & Nominal Rates of Return, 5A-67& & & Real Rates of Return, 5A-67& & overview, 5A-66& & sensitivity and probability of outcome,5A-67& & & probability factors applied, 5A-68

Agreements& fixed-amount-plus& & capital gains/losses, 8-29& price abatement& & capital gains/losses, 8-25& shareholders’, see Shareholders’ agree-ments& voting, control through, 7-18& warranty-type& & capital gains/losses, 8-22.4

Amalgamation& as type of squeeze-out, 7-105& corporate reorganization, 9-53& & short form, 9-53& defined, 3-11

Amendment of articles& appraisal rights, triggering, 7-76& type of squeeze-out, as, 7-105

Amortization& defined, 3-11

Appeal& period in which dissenter must exercisehis right of, 7-85

Appraisal& defined, 3-12& role of machinery and equipment inbusiness valuation, 12-527

Appraisal date& defined, 3-11

Appraisal remedy& availability of, 7-77& defined, 3-11

March 2018 2-11CVS 184

Appraisal rights& amendments of articles triggering, 7-76& availability of remedy, 7-77& business combinations triggering, 7-76& compulsory acquisition following take-over bids, 7-100D& defined, 7-74N& emergence of, 7-75& fair value of shares& & date at which, should be calculated, 7-82M& & meaning of, 7-78& Fraser transaction, the, 7-82I& period to exercise right of appeal, 7-85& reverses general policy of common law,7-75& stock market exception to, 7-90& triggering events, 7-76& United States, 7-87& & apportioning value among differentclasses of stock, 7-100& & costs of appraisal, 7-99& & elements considered, 7-96& & interest, 7-100& & valuation of dissenters’ stock, 7-95& & weighing factors, 7-99

Arbitrator& conclusion, 10-20& distinguished from valuer, 10-13& legal responsibility, 10-11

Arm’s length& acting at, 4-41& dispositions to obtain tax benefits, 9-18& IT Folio S1-F5-C1, 9-12& non-arm’s length transactions, 9-12

Articles of incorporation& amendment of, as type of squeeze-out,7-105& restraints on control, 7-28

Asset(s)& intangible, nature of, 6-11& net tangible assets& & goodwill as excess of going-concernvalue over, 12-15& purchase of net& redundant, see Redundant assets& sale of& & accounts receivable, 9-72& & allocation of purchase price, 9-71& & depreciable property, 9-73

& & earnouts, 9-74& & interest deductibility, 9-74& & inventory 9-73& & non-depreciable capital property, 9-73& & prepaid expenses, 9-75& & reserves, 9-75& & versus sale of shares, 9-71

Associated corporations& defined, 3-12

BB

Balance sheet, see also Financial state-ments& common size, 11-13& introduction, 11-15& leverage ratios, 11-17& liquidity ratios, 11-16& other ratios, 11-17& review and redundant assets, 5A-97

Base rate of return& defined, 3-12

Benchmark analysis& defined, 3-12

Bequest, property acquired by& non-arm’s length transaction& & fair market value determination, 9-15

Bids, see Insider bids and Issuer bids

Blockage& Australian case law, 8-16& block of publicly-traded securities, 8-12& Canadian case law, 8-12& defined, 8-11& United States regulation, 8-18

Blockage discount& defined, 3-12, 8-11, 8-18

Business& cessation of, 6-56.2

Business Corporations Act (Ontario)& appraisal rights under, 7-76, 7-77

Business disturbance& separate claim from expropriation, 12-11

Business equity valuations& policy statement (Information Circular 89-3), 2-401

2-12 Index March 2018CVS 184

Business risk& defined, 3-12

Business transition& estate freezes, 7A-11& & agreement between parties, 7A-11& & defined, 7A-11& & family business transition businessplan, 7A-14& & transition planning, 7A-11

Business valuation& defined, 3-12

Business valuation report& case study, 10-99& common deficiencies in, 10-203

Buy-sell agreements, 7-64D& defined, 3-12

CC

Canada Business Corporations Act& appraisal rights under, 7-76& constitutional documents under& & restraints on control, 7-27& duties and liability of directors, officersand controlling shareholders, 7-29& redemption amount, 9-35& share capital reorganizations, 9-52

Canadian-controlled private corporations& defined, 3-12& tax rates, 9-91

Canadian Institute of Chartered BusinessValuators& standards and recommendations, 2-201& & advisory reports& & & Standard No. 210, 2-229& & expert reports& & & Standard No. 310, 2-333& & file documentation standards and re-commendations& & & Fairness Opinions StandardNo. 530, 2-261& & & Investment Entity Review ReportStandard No. 630, 2-270& & & Limited Critique StandardNo. 430, 2-252& & & Standard No. 130, 2-226& & & Standard No. 230, 2-232& & & Standard No. 330, 2-240

& & reporting standards and recommenda-tions& & & Fairness Opinions StandardNo. 510, 2-254& & & Investment Entity Review ReportStandard No. 610, 2-263& & & Limited Critique StandardNo. 410, 2-243& & valuation report standards and re-commendations& & & Standard No. 110, 2-203& & & & Appendix A to StandardNo. 110, 2-209& & & & Appendix B to StandardNo. 110, 2-218& & work standards and recommendations,scope of& & & Fairness Opinions StandardNo. 520, 2-258& & & Investment Entity Review ReportStandard No. 620, 2-268& & & Limited Critique StandardNo. 420, 2-250& & & Standard No. 120, 2-222& & & Standard No. 220, 2-231& & & Standard No. 320, 2-237

Capital asset pricing model (CAPM)& adjustments to, textbook, 5B-50& Beta, 5B-47& defined, 3-12& estimation procedures, 5B-44& equity risk premium (ERP), 5B-45& external risk factors, 5B-58& generally, 5B-42& internal risk factors, 5B-56& interpreting, 5B-47& modern portfolio theory, 5B-41& summary, 5B-55& uses and misuses of, 5B-41

Capital budgeting, 5A-53

Capital cost allowance& defined, 3-12& depreciation and, 5A-49

Capital dividend account, 6-56.2& defined, 3-13& sale of shares, 9-83

Capital gains deduction, 9-75

Capital gains/losses& computation of

March 2018 Index 2-13CVS 184

& & fixed amount-plus agreements, 8-29& & price abatement agreements, 8-25& & sale of shares, 9-77& & warranty-type agreements, 8-22.3

Capital-intensive business& defined, 3-12& sustaining capital reinvestment, 8-84& & analysis, 8-85& & information required, 8-85& & risks, 8-84& & scenarios, 8-88

Capital property& deemed disposition by trust, 9-41& deemed disposition of, on death, 9-32& non-depreciable& & sale of assets, 9-71

Capital reinvestment, 5A-78& capitalized cash-flow approach, 5A-46

Capital structure& choosing appropriate, 5A-60& defined, 3-13& in a notional market valuation, 5A-60

Capitalization& after-tax earnings, of, for going-concernvalue, 5A-68& comparable transactions and publicmarket data, 5B-91& dual capitalization of earnings approach,5A-92& “normalized” or “indicated” earnings be-fore interest and income tax (EBIT), 5A-44& “normalized” or “indicated” earnings, dualcapitalization of, 5A-92& rate, see Capitalization rate

Capitalization rate& applied to perpetuity cash flow, 5A-60& capital asset pricing model (CAPM),5B-41& defined, 3-13& discount rate selection, 5A-59& & in a fair market value determination,5A-59& & interdependence of, and earnings/cashflow, 5B-19& & terminology, 5B-17& influence of public equity markets on, tobe applied when valuing privately-heldbusiness interests, 5B-39& multiple of EBIT and EBITDA, 5A-84

& summary, 5B-101

Cash flow& statement of, 11 -21

Cash-flow approach(es)& capitalized cash flow approach, 5A-46& & comparison with capital budgeting, 5A-53& & defined, 3-13& & depreciation and capital cost allowance,5A-49& & depreciation and capital reinvestment,5A-47& & future income taxes, 5A-50& & going-concern business, 5A-44& & steps in calculating capitalized cashflow value, 5A-50& discounted cash flow approach, 5A-55,see also Discounted cash flow approach& excess present value, determination of,5A-64& going-concern value, determining, 5A-44& increasing use of, 5A-47& methodologies, 5A-43

CICBV, see Canadian Institute of Char-tered Business Valuators

Closely-held corporation& defined, 3-13& minority interests in, 7-46& & factors affecting valuation, 7-52& restraints on control, 7-27

Coattail provision& defined, 3-13

Company Act (B.C.)& appraisal rights under, 7-76, 7-78

Comparative company multiples, 5A-86& calculating cash flow base, 5A-63& & enterprise value, 5A-90& cash flow base, calculation of, 5A-62, 5A-63& general comments on, 5A-87& earnings, calculating, 5A-63& enterprise value, 5A-90, 5A-109& & approach, 5A-62& & calculating, 5A-109& & & cash on hand, 5A-113& & & interest-bearing debt and equivalents,5A-109& & & non-interest-bearing debt equivalents,5A-112


& & cash on hand, 5A-113& & earnings before interest, taxes, depre-ciation and amortization (EBITDA), 5A-84,5A-89& & earnings before interest and taxes(EBIT), 5A-84, 5A-89& & non-interest-bearing debt equivalents,5A-112& & redundant assets, 5A-115& information availability, 5A-64& redundant assets, 5A-115& which multiple to use, 5A-89

Compound interest formulae& annuity, 5B-16& growing annuity, 5B-17& growing perpetuity, 5B-15& perpetuity, 5B-15& two-stage growth, 5B-16

Compulsory acquisition, see Expropriation

Compulsory sale provision& defined, 3-13

Conflict of interest rules& restraint on director’s control, 7-30

Conglomerate& defined, 3-13

Consolidation& as type of squeeze-out, 7-105& consulting agreements, 5C-34

Control& casting vote, through, 7-13& de facto, defined, 3-14& de jure, defined, 3-14& effective, de facto, through redemptionand conversion, 7-21& group, 7-23& intermediate corporations, through, 7-14& legal, 7-12& potential, 7-19& premiums paid for, 7-32, 7-34B& property in, 7-32& proxies and powers of attorney, 7-19& restraints on, 7-26, see Restraints oncontrol& shareholders of company that ownscontrolling shares in another company, 7-15& special shares, through, 7-151& trustees and nominees, through, 7-14& voting agreements, through, 7-18

Control premium& defined, 3-13

Control premium& defined, 3-13

Controlling interest& defined, 3-14& general principles that apply to both openand notional markets when valuing, 5-22,5-23& premiums paid for control, 7-34B& valuation of, 7-34

Controlling shareholders& legal duties, 7-29& rights of, 7-34B

Convertible securities& corporate reorganizations, 9-42

Corporate acquisition& assessing net economic value, 5-228& costs involved, 5-230

Corporate income tax rates, 9-91& changes and the impact on value, 9-91& general rate, 9-91& manufacturing and processingdeduction, 9-93& small business deduction, 9-92

Corporate-owned life insurance& fair market value, provisions determining,9-68

Corporate reorganizations& fair market value determination, 9-42& & amalgamation, 9-53& & convertible securities, 9-41& & share capital reorganization, 9-52& & transfer to corporation, 9-44& & winding-up of 90%-ownedsubsidiary, 9-57

Corporation& closely-held& & restraints on control, 7-27& intermediate, control through, 7-14& receiving life insurance proceeds& & value of shares, 9-69& transfer of property to& & corporate reorganization, 9-44

Corporations Act (Manitoba)& appraisal rights under, 7-76


Cost& involved in corporate acquisition, 5C-14& replacement, 5A-94

Cross-Holdings, Companies& analysis, 8-95 to 8-98& illustrative example, 8-95& interpretation, updated structure,8-98 to 8-101& organization structure, 8-95& reasons for, 8-94& valuation of, 8-94 to 8-101

DD

Damages& measure of, against value, 10-19

De facto control& defined, 3-14

De jure control& defined, 3-14

Deal financing& Common and preferred stock, 5C-28& & common stock, 5C-28& & cross-border exchangable share struc-tures, 5C-30& & preferred stock, 5C-30& earn-outs, 5C-31& overview, 5A-27& vendor take-backs, 5C-30

Death of shareholder& provision for, in shareholders’ agree-ments, 7-64

Death of taxpayer& commercial versus non-commercialgoodwill, 6-23& deemed disposition on& & capital property, 9-32& & depreciable property, 9-32& & eligible capital property, 9-35& & introduction, 9-32& & land inventory, 9-37& & resource property, 9-36& & rollovers, 9-34& & shareholders’ agreement, 7-64E, 7-64G

Debt& long-term& & changes to, 5A-81

Debt servicing costs& defined, 3-14

Deceased taxpayer, see Death of taxpayer

Deferred income taxes& capitalized cash flow approach, 5A-50

Deferred revenue& balance sheet, 5A-117& definition, 5A-119& discretionary cash flow,definition, 5A-118& negative working capital balance, 5A-117& net trade working capital,definition, 5A-118

Definitions, 3-11

Depreciated replacement value& defined, 3-14, 4-18

Depreciation& capitalized cash-flow approach, in, 5A-47& defined, 3-14& recapture defined, 3-23& sale of assets, 9-72& V-Day valuation, 9-101, 9-111

Derivative securities& defined, 3-14

Dilutive securities& defined, 3-14

Directors, corporate& care and skill required, 7-30& conflicts of interest, 7-30& legal duties, 7-29& liabilities, 7-30, 7-31& relieving provisions, 7-30& restraints on control, examples of, 7-26,7-27

Discount& acquisition of debt or shares at, 9-86

Discount for liquidity& defined, 3-14

Discount for non-control& defined, 3-15

Discount rate& comparable transactions and publicequity market, 5B-38& components of, 5B-19& defined, 3-15


& summary, 5B-101& terminology, 5B-17

Discounted cash flow approach& capital structure, choosing the appro-priate, 5A-60& defining discretionary cash flow from op-erations, 5A-56& discount rate selection, 5A-59& generally, 5A-55& mechanics of, 5A-56& non-discretionary cash flow, 5A-58& terminal value, 5A-58& & Gordon Growth Model formulation, 5A-58

Discretionary cash flow& defined, 3-15, 5A-57

Dissent right& defined, 3-15

Dissolution& as type of squeeze-out, 7-105

Dividend payable& in kind& & fair market value determination, 9-40& stock& & fair market value determination, 9-41

Domestic contracts& Family Law Act (Ontario) and, 12-2017

Due diligence, 4-39

EE

Earnings& multiple of EBIT and EBITDA, 5A-84& cash flow selection, 5A-86& dual capitalization of, 5A-92

Earn-outs, 8-21, 8-22.2& defined, 3-15& deal financing, 5C-31& payments based on production or use, 8-22.1& sale of assets, 9-74& sale of shares, 9-74, 9-82& special situations, 8-21& tax treatment, 8-21, 8-22.2

EBIT& defined, 3-15& multiple of, 5A-84

EBITDA& defined, 3-15& multiple of, 5A-84

Economic Environment& commodity prices, 10-30.5& foreign exchange rates, 10-30.4& inflation rates and money market condi-tions, 10-30.7& other macro-economic factors, 10-30.9

Economic life& defined, 3-15

Economies of scale& defined, 3-15

Elections& median rule versus V-Day value, 9-101& sale of accounts receivable, 9-72& transfer of property to corporation, 9-44

Eligible capital expenditures& meaning, 6-43

Eligible capital property, 6-73& deemed disposition on death, 9-32, 9-35& defined, 6-73& depreciable property regime, 9-35& disposition& & government rights, 6-89& disposition of, 6-43, 6-81 to 6-83& pool basis of treatment, 6-85, 6-86

Empirical evidence& acquisition criteria, 8A-13& conclusions, 8A-23& deal structure, 8A-21& limitations and qualifications, 8A-13& other issues, 8A-23& overview, 8A-11& post-acquisition synergies, 8A-20& rates of return, 8A-16& survey, the, 8A-11& valuation methodology, 8A-15

En bloc value& defined, 3-16& report& & case study, 10-85, 10-88& versus partial interests, 5A-30

Environmental liabilities& impact on business valuations, 5A-120& independent environmentalassessments, 5A-124& quantification considerations, 5A-123


& valuator procedures, 5A-122

Enterprise value& defined, 3-16& of EBITDA, 5A-90

Equipment valuation& introduction, 12-511& real estate valuation, 12-522& & report layout, 12-532& report& & case study, 10-130

Equity value& defined, 3-16

Estate planning& valuation of special shares created forpurposes of, 7-155

Expenses, prepaid& sale of assets, 9-75

Expropriation& goodwill as excess of going-concern va-lue over net tangible assets, 12-15& introduction, 12-11& Leach formula approach to valuation ofgoodwill, 12-13, 12-27& Ontario Law Reform Commission reporton, 12-31& potentialities, relevance of, 4-27, 4-28& rule-of-thumb approach to valuing good-will, 12-30& special purchaser consideration in va-luation of goodwill, 12-24& where not feasible for owner to relocate,12-14

Expropriation Act& Alberta, 12-12& Manitoba, 12-12& New Brunswick, 12-12& Nova Scotia, 12-12& Ontario, 12-12, 12-14, 12-15, 12-24

Externally financed transaction& defined, 3-16

FF

Fair market value& conclusion, 4-39& confusion of, with value to owner, 4-14& defined, 3-16, 4-21

& determination of, in a notional market, 4-39, 4-45& distinguished from market value, 4-12& highest price available, 4-23& Income Tax Act, see Fair market value(Income Tax Act)& liquidation approach taken to mean, 5-35& minority shareholding, of factors con-sidered in determining, 7-52& sale of property less than, 9-76& taxing statutes, 9-11& versus price/stand-alone value versuspurchaser perceived post-acquisition neteconomic value-added considerations, 5B-29

Fair market value (Income Tax Act)& arm’s length disposition& & to obtain tax benefits, 9-18& concept of, 9-11& corporate reorganizations, see Corporatereorganizations& corporate-owned life insurance, 9-68& deemed disposition by trust, 9-41& deemed disposition on death, see Deathof taxpayer& defined, 7-104& dividends in kind, 9-40& dividends, stock, 9-41& life insurance policies, 9-69& mark-to-market properties, 9-64& non-arm’s length agreement,& & use of property, for use of, 9-16& non-arm’s length loans orindebtedness, 9-40& non-arm’s length transactions(s. 96), 9-12& & acquisition of property, 9-12& & agreement for the use of property, 9-16& & disposition of property, 9-13& & dispositions to obtain tax benefits, 9-18& & property acquired by gift, bequest, orinheritance, 9-15& & property appropriated on winding-up,9-16& & property appropriated to shareholders,9-16& & resource dispositions, 9-18& & transfer pricing rules, 9-21& & transitional rules, 1971, 9-17& partnership reorganizations, 9-58& & conversion to sole proprietorship, 9-60& & transfer of partnership, 9-58


& & winding up, 9-59& price adjustment clauses, 9-24& real estate valuation, 12-520& residence, change of, 9-61& section 160, 9-65& shareholder benefits, 9-60& small business corporation, 9-64& stock dividends, 9-41& transfers between spouses, 9-37& transfers to minors, 9-39& transfers to spouse, 9-65& trusts, 9-41& & deemed disposition of capitalproperty, 9-41& & disposition of income interests, 9-42& V-Day valuation, see Valuation Dayvalue (V-Day)

Fair value& appraisal rights and, 7-74N& & date at which value should be calcu-lated, 7-82M& & meaning, 7-78& defined, 3-16, 4-13& distinguished from fair price, 7-108

Family control& defined, 3-16

Family Law Act (Ontario)amendment, 12-2016

& application of, on death, 12-2016& contrasted with Family Law Reform Act,12-2016& disclosure requirements, 12-2017& domestic contracts and, 12-2017& equalization provisions& & availability of, 12-2016& & discretion to vary, 12-2014& & when spouse becomes entitled to, 12-2013& matrimonial home, 12-2015& net family property& & deceased spouse and, 12-2016& & defined, 12-2013& & determining value, 12-2013& & exclusions, 12-2013& overview, 12-2011& valuation issues under, 12-2018& & tax and disposition costs, 12-2019& & what liabilities considered, 12-2022& & what valuation date, 12-2019& & what value, 12-2018

Family property, 12-2011

Fiduciary responsibility& as restraint on control, 7-29

Financial leverage& defined, 3-16& sensitivity of, 5A-107

Financial review, 10-27

Financial risk& defined, 3-16

Financial statements, see also Balancesheet& cash flow, statement of, 11-21& conclusion, 11-25& difficulties inherent in, 11-11& introduction, 11-11& other analytical techniques, 11-22& regression analysis, 11-25& return and profitability, analysis of, 11-19& types of& & common size, 11-13& & liquidity ratios, 11-16& & ratio analysis, 11-14& & trend analysis, 11-12& types of analysis, 10-30.12

Financial synergies& defined, 3-16

Fixed-amount-plus agreements& capital gains/losses, 8-29

Forced liquidation& defined, 3-17& distinguished from orderly liquidation, 4-19& gross value

Forward exchange contract& defined, 3-16

Future income tax balances, 5A-3

GG

Gift, property acquired by, in non-arm’slength transaction& fair market value determination, 9-15

Going-concern& approach, 5A-11, 5A-25& defined, 3-17


Going-concern risk& defined, 3-17

Going-concern value& adjusted net book value as valuationtechnique, 5A-41& approach, 5A-11& asset value considerations in going-con-cern valuation, 5A-32& capitalization rate& & capital asset pricing model, 5B-41& defined, 4-19& goodwill as excess of, over net tangibleassets, 12-15& liquidation value approaches, 5A-11& overview of earnings/cash flow basesvaluation techniques, 5A-43& quantifying value of redundancy, 5A-103

Going private transactions, 7-101& Canadian case law, 7-111& defined, 7-102& economic justification, 7-106& fair value as distinguished from fair price,7-108& introduction, 7-101

Goodwill& commercial saleability, 12-14& deceased taxpayer, 6-23& defined, 3-17& disposition of, 6-42& excess of going-concern value over nettangible assets, 12-15& expropriation on, 12-11& forms of, 6-14& & individual, 3-18& & location, of, 6-15& & & defined, 3-17& & personal, 6-14& & & defined, 3-22& & product, of, 6-15& & & defined, 3-17& & service, of, 6-16& & & defined, 3-17& going-concern value, 5A-25& Leach formula, 12-13, 12-27& location of, 6-28& & defined, 3-17& nature of, 6-12& other measures of value (U.S.), 6-34& personal& & case law in Canada, 6-16& & case law in United States, 6-24

& & considerations in assessing value, 6-31& & defined, 3-17& product or service of, 6-29& rule of thumb approach to valuation of,12-30& special purchaser consideration in va-luation of, 12-24& summary of jurisprudence re commercial/non-commercial, 6-21& “super profits”, 12-14& valuation of, in United States, 6-34, 6-32B& where not feasible for owner to relocate,12-14

Gross after tax cash flow from operations& defined, 3-16

Group control& defined, 3-17

HH

Hard right of first refusal& defined, 3-17

Highest price available& defined, 4-23

Holding company& defined, 3-17& valuation of, 5A-41

Horizontal analysis& defined, 3-18

Hurdle rate of return, see Threshold rate ofreturn

II

Identical properties& V-Day valuation, 9-101

Identifiable intangible assets& defined, 3-18& examples, 6-12.1

Income& sale of shares, from, 9-77

Income attribution& minor children, transfers to, 9-39& spouses, transfers between, 9-37

Income tax, see also Fair market value(Income Tax Act)


& business equity valuations, policy state-ment on (Information Circular 89-3), 2-401& corporate, selection of, 9-91& deferred& & capitalized cash-flow approach, 5A-50& & income tax balances, 5A-36& earn-outs, 88-21, 8-22.2& fair market value, see Fair market value(Income Tax Act)& future balances, 5A-36& intangible values, effect of, on, 6-88& intangibles, tax treatment of, after 2016,6-41& intangibles, tax treatment of prior to 2017,6-81 to 6-83& & capital dividend account, 6-89, 6-90& & cessation of business, 6-90& & effect of taxes on intangible values,6-91& & eligible capital property, 6-73& & government rights, 6-89& & no reserve on sale of intangibles, 6-88& & pooling basis, 6-85, 6-86& & replacement property, 6-90, 6-91& & sale of shares, 6-89& & section 69, 6-89& & valuing, 6-91& Internal Revenue Service (IRS) Rulings& & Revenue Ruling 59-60, 2-555, 4-22& & Revenue Ruling 68-609, 4-22& & IRS Revenue Ruling 77-287, 2-562& Interpretation Bulletins& & accounts receivable (IT-188R; IT-291R2), 9-72& & arm’s length (IT Folio S1-F5-C1), 9-12& & buy-sell agreements (IT-140R2)& & convertible securities (IT-115R; IT-146R4), 9-42& & earn-out agreement, shares sold sub-ject to (IT-426), 8-22.2& & eligible capital expenditure, meaning of(IT-143R3), 6-74& & interest deductibility (IT Folio S3-F6-C1), 9-74& & price adjustment clauses (IT FolioS4-F3-C1), 9-27& & redemption amount (IT-448), 9-31& & reserves (IT-123R6), 9-76& partnership reorganizations, seePartnership& rate selection, 5A-83& section 160, 9-65& & non-arm’s length transfers, 9-65

& tangible asset backing& & deferred income tax balances, 5A-36& & tax shield considerations, 5A-38& & & details of calculation of shortfall in taxshield to purchaser of shares, 5A-40& valuation day prices of shares: publicly-traded shares or securities (Schedule VII toIncome Tax Regulations), 2-501

Income tax application rules, 1971 (ITAR)& fair market value, 9-11

Income tax folios& S3-F6-C1, Interest Deductibility, 9-74& S4-F3-C1, Price AdjustmentClauses, 9-111& S4-F5-C1, Share-for-ShareExchange, 9-56

Incorporation, articles of& as restraint on control, 7-29

Indicated after-tax earnings from opera-tions& capitalization, 5A-68& dual capitalization, 5A-92& or indicated discretionary after-tax cashflow, 5A-68& & coordination with business, industry andeconomic review, 5A-77& & current results, 5A-69& & forecasted earnings, 5A-70& & & influence of external factors, 5A-72& & historic operating results and relatedadjustments, 5A-72& & inflation adjusted simple average, 5A-74& & inflation adjusted weighted average,5A-75& & other considerations, 5A-76& value conclusion, 5A-127

Indicated earnings before interest and in-come tax (EBIT)& capitalization, 5A-43, 5A-86& defined, 3-15& multiple, 5A-84

Individual goodwill& defined, 3-18

Industry specific activity ratios& defined, 3-18

Information Circulars, see Income tax

Information package


& defined, 3-18

Informed prudent parties& notional market, 4-36

Information Circulars:& IC 87-2R, 9-21& IC 89-3, 2-401, 9-69& IC 76-19R3, 9-25, 9-47

Inheritance, property acquired by, innon-arm’s length transaction,& fair market value determination, 9-15

Insider bids& conclusion, 7-122& defined, 7-102& fair value as distinguished from fair price,7-108& introduction, 7-101& squeeze-outs& & types of, 7-105& & United States case law, 7-110

Insider trading& limitations on, 7-30

Insolvency& defined, 3-18

Intangible operating synergies& defined, 3-18

Intangibles& effect of taxes on values of, 6-91& goodwill categorized, 6-14, see alsoGoodwill& income tax treatment of, 6-42& management continuity agreements, 6-34& nature of, 6-11& no reserves on sale of, 6-88& non-competition agreements, 6-34& & apportionment of purchase price to non-competition agreements& & & in notional market context, 6-39& & & in open market context, 6-38& overview, 6-11& sale of shares, 6-89& valuation of, 6-26& valuing, for tax purposes, 6-91& & other methods for, 6-32& & & capitalizing (discounting) of incomeand discretionary cash flow approaches, 6-32& & & cost approach, 6-32

& & & excess earnings (cash flow) method(dual capitalization of earnings or cashflow), 5A-92, 6-32A& & & market comparison approach, 6-32& & & other valuation methodologies, 6-32A& & & value of royalties, 6-32A

Interest, deductibility of& sale of assets, 9-74

Intermediaries& defined, 3-18

Intermediate corporations, control through,7-14

Internal rate of return& defined, 3-19

Internal Revenue Service, see also Incometax& IRS Revenue Rulings 59-60, 2-555& IRS Revenue Rulings 65-193, 2-562& IRS Revenue Rulings 77-287, 2-562

Internally financed transaction& defined, 3-19

Interpretation Bulletins:& IT-67R3 — Taxable Dividends from Cor-porations Resident in Canada, 9-40& IT-115R2 — Fractional Interest inShares. 9-43& IT-123R6 — Transactions InvolvingEligible Capital Property, 9-76& IT-140R3 — Buy-Sell Agreements,7-64D& IT-143R3 — Meaning of Eligible CapitalExpenditure, 6-43& IT-146R4 — Shares EntitlingShareholders to Choose Taxable or CapitalDividends, 9-43& IT-188R — Sale of Accounts Receivable,9-72& IT-206R — Separate Businesses, 6-88& IT-217R — Depreciable Property Ownedon December 31, 1971, 9-35, 9-111& IT-386R — Eligible Capital Amounts,6-81& IT-416R3 — Valuation of Shares of aCorporation Receiving Life Insurance Pro-ceeds on Death of a Shareholder, 9-68& IT-426 — Shares Sold Subject to anEarnout Agreement, 8-22.1& IT-448 — Dispositions—Changes inTerms of Security, 9-35


& IT-462 — Payments Based on Produc-tion or Use, 9-75& IT-474R2— Amalgamations of CanadianCorporations, 9-56

Intrinsic value& defined, 3-19, 4-17

Inventory& land, deemed disposition on death, 9-37& sale of assets, 9-71

Invested (or “levered”) equity& defined, 3-19& introduction, 5B-61

Investment tax credits, undeducted& sale of shares, 9-79

Issuer bids& defined, 7-102& fair value as distinguished from fair price,7-108& independent valuation: the accountant’srole, 7-121& introduction, 7-101

JJ

Joint valuation& communication protocols, 10-201,10-202& draft report, review, submissions, 10-202& joint retainer format, 10-199& & advantages, 10-199& & challenges, 10-199& & minimize conflict, 10-200& & process, 10-199, 10-200& mandate, 10-200& & value& & & conclusion, 10-201& & & date, 10-200& & & definition, 10-200& process, 10-201

Joint ventures, 8-47& additional funding requirements, 8-48& contributions by parties, 8-47& management and control, 8-48.1& termination and exit strategy, 8-48.2

LL

Land inventory& deemed disposition on death, 9-37

Leach formula (goodwill valuation), 12-13,12-27

Lease amendments, 5C-34

Legal control, 7-12

Leverage& defined, 3-19

Leveraged buyout& defined, 3-19

Levered equity, see Invested (or “levered”)equity

Life insurance policies& business-owned, 8-54& & arm’s length party, 8-73& & comparing FMV vs. cashsurrender, 8-56& & fair market value, 8-54, 8-58& & & framework, 8-58& & & mortality expectations, 8-61& & & & qualification, 8-63& & & & sensitivities, 8-65& & & & tables, 8-68, 8-69, 8-70, 8-71& & & policy variables, 8-59& & & price, 8-71& & & taxation, 8-73& & & valuation, 8-58, 8-75& & markets, 8-55& corporate-owned& & fair market value, provisions determin-ing, 9-68

Liquidation& approaches to, calculation, 5A-15& defined, 3-19& forced, 5A-42& orderly, 5A-42

Liquidation value, see also Orderly liqui-dation& approaches, 5A-11& & holding companies, valuation of, 5A-41& & non-going-concern businesses, 5A-42& & risk management, 5A-41& defined, 3-19, 4-19& failed businesses, 5A-12& liquidation-based values, developing, 5A-13& liquidation calculations, approaches to,5A-12& illustration of, 5A-19& non-going-concern business, 5A-42


& post-acquisition value, 5A-41& risk measurement, 5A-41& valuation of holding companies, 5A-41

Liquidity& defined, 3-20

Liquidity ratios, 11-16

Liquidity value& approach, 5A-41& forced liquidation& & distinguished from orderly, 4-19& orderly liquidation, 5A-13

Loans& non-arm’s length& & fair market value determination, 9-40

Location& goodwill of, 6-28

Long-term debt& changes to, 5A-81& consideration of underlying financialstructure, 5A-80& principal payment vs withdrawl, 5A-80

Losses& sale of shares, 9-79

MM

Machinery valuation& real estate valuation, 12-522& & report layout, 12-526

Management agreement& defined, 3-20

Management contracts, 5C-33

Management continuity agreements& intangibles, 6-34

Mandatory sale& defined 3-20

Manufacturing and processingdeduction, 9-93

Market& fair value, see Fair market value& notional, 4-20& open, 4-20, 4-32& unrestricted, 4-33

Market value& defined, 4-11

& distinguished from fair market value, 4-12

Marketability discount& defined, 3-20

Matrimonial home& and Family Law Act (Ontario), 12-2015

Median rule& versus V-Day value, election, 9-101

Minors, transfers to& fair market value determination, 9-39& income attribution, 9-39

Minority discount& defined, 3-20

Minority interests, valuation of, 7-46& closely-held corporations& & factors affecting valuations, 7-52& conclusion, 7-74& existing agreements, 7-57& factors to be considered in, 7-52& familial relationships, 7-68& general principles that apply to both openand notional markets when valuing, 5-25& introduction, 7-11& nuisance value, 7-73& organized market for, whether, 7-74& share transfer, restrictions on, 7-64F& shareholder relationships, 7-66& special shares, 7-151

Minority shareholding& defined, 3-20

Modified tangible asset backing& defined, 3-20

Multiple (Multiplier)& defined, 3-20& of EBIT and EBITDA, 5A-86

NN

Negative redundancy& defined, 3-20

Net assets& notional market for& & caveats re special purchasers, 5-28

Net book value& defined, 3-20

Net economic value-added& assessing, 5C-10


& establishing rate of return, 5C-10& factors influencing, 5-21& minimum requirements, 5C-16& open market transactions, 5-22& post-acquisition, 5-19, 5C-12& purchasers who perceive post-acquisi-tion, 5-19& quantifying, 5C-10, 5C-17

Net income loss& defined, 3-21

Net realizable value& defined, 3-21

Net trade working capital& defined, 3-21

Nominal rate of return& defined, 3-21

Nominees, control through, 7-14

Non-arm’s length loans& fair market value determination, 9-40

Non-arm’s length transactions& fair market value determination, provi-sions requiring, 9-12

Non-arm’s length transfers (Section 160),9-65& bequest of property, 9-66& dividends in kind, 9-67& joint tenancy, 9-65& liability, 9-66& & personal, 9-66& & joint and several, 9-67& minors, to, 9-65& non-arm’s length person, to, 9-65& spouse, to, 9-66& & upon separation, 9-67& stock dividend, 9-67& tax avoidance, 9-65& transferee obligations, 9-65& transferor obligations, 9-65

Non-competition agreement& apportionment of purchase price to& & in notional market context, 6-39& & in open market context, 6-38A& defined, 3-21& intangibles, 6-34

Non-identifiable intangible value& defined, 3-21

Notional market value, 4-20& acting at arm’s length, 4-41& apportionment of purchase price to non-competition agreements in, 6-39& appropriateness of including special pur-chasers, 4-26& “best efforts” basis, 4-23& between informed parties, 4-36& between prudent parties, 4-41& caveats re special purchasers, 5-25& defined, 3-21, 4-20& differences from open market, 4-20, 4-45& expressed in terms of cash, 4-44& fair market value, 4-21& & Canadian courts, 4-28& & highest price available, 4-21& & “open market”, 4-20, 4-32& general valuation principles& & special interest purchaser, 4-24, 5-19& & that apply only to, 5-11& & that apply to both open market and, 5-11& restrictions on transfer, 4-34& special interest purchaser and, 4-24, 5-19& & examples, 5-28& under no compulsion to act, 4-42& unrestricted market, 4-33& vendor’s position, 4-29

Notional valuation opinions& application to, and relative reliability of,versus open market price, 5-25

OO

Officers, corporate& care and skill required, 7-30& conflicts of interest, 7-30& legal duties of, 7-29

Oil and gas exploration& basic principles, 8AA-11& cash flow methodology, 8AA-20& & example, discounted, 8AA-21& cash flows, 8AA-18& enterprise value, defined, 8AA-12& fair market value and reserve studyconclusions, difference between, 8AA-17& goodwill, defined, 8AA-12& NAV, 8AA-13& oil


& & conventional vs. unconventional,8AA-15& & grades, 8AA-15& & recovery techniques, 8AA-16& oil to gas ratio, 8AA-16& price/NAV ratios, 8AA-13& production wedges, 8AA-17& reserves, development, 8AA-15& reserves, types, 8AA-14& risk assessment, 8AA-20& valuation, 8AA-11& & market approach, 8AA-22& & possible or contingent reserves, 8AA-13

Ontario Law Reform Commission& report on expropriation, 12-31

Ontario Securities Act, value under, 7-131

Ontario Securities Commission& Valuations, 7-104& issuer bid rules, 7-102& regulation of& & insider bids, 7-102& & issuer bids, 7-102& & take-over bids, 7-101& value under the Act, 7-131

Open market& apportionment of purchase price to non-competition agreements in, 6-38& basic approaches for determining value,4-20, 4-32& defined, 3-21, 4-32& determination of price in a, 4-45& differences from notional market, 4-20& general valuation principles that apply to,5-11& purchasers who perceive post-acquisi-tion net economic value-added, 5-19& special interest purchasers, 5-19

Open market price& notional valuation opinion versus, 4-20,5-25& transaction prices, 5A-97

Open market transactions& assessing net economic value added,5C-10& cumulative synergies, 5C-25& determining amount that purchaser canpay, 5C-7& environmental liabilities in, 5A-120& establishing price for purposes of, 5C-6

& introduction, 5C-3& market, the, 5C-6& & purchaser, 5C-9& & vendor, 5C-8& negotiating price in, 5-22& net economic value-added, assessing,5C-10& & benefits, 5C-11& & costs, 5C-14& & minimum requirements, 5C-16& post-acquisition net economic value ad-ded, identifying, 5C-12& price, 5A-97& special interest purchasers, identifying,5C-9& utilizing external advisor in corporate ac-quisition, 5C-9& value conclusion, 5A-127& vendor considerations, 5C-8& & establishing price for business, 5C-8& & negotiating transaction, 5C-8

Operating leverage& defined, 3-22

Opportunity cost& defined, 3-22

Oppression remedy& defined, 3-22

Options& introduction to, 8-35& pricing theory, 8-35

Orderly liquidation& defined, 3-22& developing liquidation-based values, 5A-13& distinguished from forced liquidation, 4-19& equipment valuation and, 5A-14& liquidation costs, 5A-13, 5A-14& value& & real estate valuation, 12-519

Orderly liquidation value, 5A-13

Over-the-counter market& defined, 3-22

Owner, value to& confusion of, with fair market value, 4-14& defined, 4-14& distinguished from value in use, 4-18


PP

Partial interest& en bloc value versus, 5A-30

Partnership& defined, 3-22& reorganizations& & conversion to sole proprietorship, 9-60& & transfer to partnership, fair market de-termination, 9-58& & winding-up, 9-59& valuation report for partnership interest,10-90

Payments based on production or use,8-22

Personal goodwill& case law in Canada, 6-16& case law in United States, 6-24& considerations in assessing value, 6-31& defined, 3-22

Post-acquisition net economic value-added(or benefits)& defined, 3-22

Potential uses& relevance to valuation in compulsory ac-quisition, 4-28

Power of attorney& control and, 7-19

Preferred shares& convertible, 8-32& liquidation premiums, 8-33& overview, 8-31& participating, 8-35& redeemable, 8-33& retractable, 8-33& valuation based on dividend yield, 8-34

Premium for control& defined, 3-22& generally, 7-32, 7-34B

Prepaid expenses& sale of assets, on, 9-75

Price& allocation of, on sale of assets, 9-71& defined, 3-23, 5-227

Price abatement agreements& capital gains/losses, 8-25

Price adjustment clauses& fair market value determination, 9-24

Price earnings ratio& defined, 3-23

Pricing decisions& application of weighted average cost ofcapital to, 5B-78& factors considered by vendor, 5C-5

Primary offering& defined, 3-23

Privately-held business interest& defined, 3-23& influence of public equity markets oncapitalization rates to be applied when va-luing, 5B-39

Privately-held company (or corporation)& defined, 3-23& non-competition andmanagement agreements, 6-34

Production, payments based on, 8-20

Profit& “super profits”, 12-14

Profit margin& analyzing, 11-19

Profitability& analysis of, 11-19

Property& acquired in non-arm’s length transaction& & fair market value determination, 9-12& & & acquisition of property, 9-12& & & agreements for the use ofproperty, 9-16& & & appropriated on winding-up, 9-16& & & appropriated to shareholders, 9-16& & & disposition to obtain tax benefits, 9-18& & & disposition of, 9-13& & & gift, bequest or inheritance, 9-15, 9-65& & & non-arm’s length agreement& & & & for use of, 9-16& & & resource dispositions, 9-18& & & transitional rules, 1971, 9-17& & & transfer pricing rules, 9-21& capital& & deemed disposition on death, 9-32& depreciable& & deemed disposition on death, 9-32& & sale of assets, 9-71


& & V-Day valuation, 9-101, 9-111& disposed of, at arm’s length& & fair market value determination, 9-12& identical& & V-Day valuation, 9-101& non-depreciable capital& & sale of assets, 9-71& replacement, 6-90& resource& & deemed disposition on death, 9-32& sale of& & less than fair market value, 9-76& valuation, introduction to, 12-511& transfer of& & non arm’s length, 9-65& & to spouses, 9-65

Proposal to creditors& defined, 3-23

Proprietorship& defined, 3-23

Proxies& control and, 7-19

Public company& defined, 3-24

Public equity market& influence of on capitalization rate& & to be applied when valuing privatelyheld business interests, 5-112& & private business, 5B-39& & transaction analysis-comparables andinfluence of, 5-111

Publicly-traded securities& V-Day valuation, 9-107

Purchase price& apportionment of, to non-competitionagreements in notional market context, 6-39& apportionment of, to non-competitionagreements in open market context, 6-38A

Purchaser& assessing net economic value-added,5C-10& costs involved in acquisition, 5C-14& determining amount that can be paid, 5C-8& informed, prudent, 4-41& sale of shares versus sale of assets, 9-71& utilizing external advisors, 5C-10

Purchaser perceived net economic value-added& defined, 3-23

QQ

Qualified small business shares& rules re, 9-65

Qualitive review, 10-27

Quasi-arbitrator, 10-11& distinguished from valuer, 10-13

RR

Rate of return& defined, 3-24& integration of concepts, 5B-78& invested (or levered) equity, on defined,3-24& present value theory and, 5B-11& real defined, 3-24& risk free defined, 3-25& threshold& & defined, 3-27& & introduction, 5B-61& time-adjusted, 5A-130& unlevered, on equity defined, 3-27

Rateable value& defined, 3-24

Rate of return on levered (invested) equity& defined, 3-24

Real estate& common machinery and equipment va-luation report layout, 12-532& common qualifications, 12-531& defined, 3-24& factors affecting value, 12-512& & competition, 12-512& & highest and best use concept, 12-512A& & prospective value and benefits ex-pected, 12-512& & supply & demand, 12-512& fair market value, price and special pur-chasers, 12-526& general commentary, 12-528& impact of financial stability on the market,12-527& introduction, 12-511


& introductory definitions, 12-512& machinery and equipment valuation, 12-522& orderly liquidation value, 12-525& other factors affecting the proceeds rea-lized on the sale of assets, 12-528& overview, 12-511& reproduction and replacement value, 12-523& role of machinery and equipment ap-praisals in business valuation, 12-527& scope of work, 12-530& technology comment, 12-530& valuation report (case study), 10-137& & reviewing, 12-513& & suggested outline, 12-251& value in use, 12-517

Real property& defined, 3-24& valuation report, 10-137

Real rate of return& defined, 3-24

Recaptured depreciation (recapture)& defined, 3-24

Receivership& defined, 3-24

Redemption& structuring of, to achieve de facto control,7-21

Redundancy& financing, 5A-99& hidden, 5A-101& quantifying value of, 5A-103& & debt-free analysis, 5A-108& & excess working capital, 5A-103& & overleveraged financial position: “ne-gative redundancy”, 5A-105& & seasonal working capital fluctuations,5A-103& & sensitivity of, 5A-107& & underleveraged financialposition, 5A-103

Redundant assets& balance sheet review, 5A-97& defined, 3-25, 5A-97& disposition and distribution costs relatedto, 5A-108& financing, 5A-99& hidden redundancy, 5A-102

& non-operating, 5A-98& open market transactions, and, 5A-100& operating, 5A-98& segregating, 5A-99

Refundable dividend tax on hand& defined, 3-25& sale of shares, 9-83

Regression coefficients& common problems in estimating, 11-29

Related party transaction, 7-103

Replacement cost (new)& approach, 5A-94& & activity ratios and other industry criteria:“rule of thumb”, 5A-94& & open market transaction prices, 5A-97& defined, 3-25& value conclusion, 5A-127

Replacement property, 6-90& defined, 4-18& depreciated, 4-18& new, 4-18& real estate valuation, 12-523

Report, valuation, 10-77

Representation, letter of, 10-25, 10-139,10-154G

Reproduction cost (new)& defined, 3-25

Reproduction value& real estate valuation, 12-523

Reserves& sale of assets, 9-76& sale of shares, 9-82

Resource dispositions& fair market disposition& & non-arm’s length transactions, 9-21

Resource property& deemed disposition on death, 9-36

Restraints on control, 7-26& authority of directors, 7-27& authority of shareholders or classes ofshareholders, on, 7-28& closely-held corporation, in, 7-27& constitutional documents under CanadaBusiness Corporations Act, 7-27& fiduciary responsibility, 7-30


& legal duties of directors, officers andcontrolling shareholders, 7-29& other provisions in articles of incorpora-tion, 7-29& unanimous shareholder agreement, 7-27

Residence, change of, 9-61

Restrictions on transfer& defined, 4-34

Return& analysis of, 11-19& time-adjusted rate of, 5-225

Reverse split& as type of squeeze-out, 7-105

Right of first refusal& defined, 3-25

Risk-free rate of return& defined, 3-25& “flights to equality”, 5B-22& rates of return, 5B-22

Risk free returns, 5B-22& capitalization techniques and growth ex-pectations, 5B-25& defined, 3-25& inflation considerations, 5B-23

Rollovers& defined, 3-25& share-for-share exchange, 9-79& spouse or trust, to, on death, 9-34& spouse trust, to, 9-34, 9-37

Rule-of-thumb method of valuation& activity ratios and other industry criteria,5A-94, 5A-97& goodwill, 12-30

Rule of thumb& defined, 3-25

SS

Safe income& defined, 3-25

Scientific research expenditures, un-detected& sale of shares, on, 9-81

Secondary offering& defined, 3-26

Securities& convertible& & corporate reorganizations, 9-42& publicly-traded& & blockage, 8-11& & V-Day valuation, 9-107

Security analysis& defined, 3-26

Sentimental value& defined, 4-16

Share exchange& defined, 3-26

Share transaction& defined, 3-26

Share transfers, restrictions on, 7-64F

Share-for-share exchange, 9-79

Shareholders& benefits, 9-60& constitutional changes, 7-31& controlling, legal duties of, 7-29& death, disability, dissension, etc., provi-sion for, 7-64& dissenting rights, 7-31& & appraisal, of, 7-74N1& familial relationships, 7-68& minority& & common law restrictions on majorityshareholders, 7-74N& owning controlling shares in anothercompany, 7-15& property appropriated to, in non-arm’slength transaction& & fair market value determination, 9-16& relationships, 7-66& remedies, 7-31& restraints on control, examples of, 7-28& rights re takeover bids, 7-31

Shareholders’ agreements& buy-sell, 7-64D& conflicting interests, protected by, 7-62& deceased taxpayer, 7-64E, 7-64F& defined, 3-26& defining formula approach to value in,problems, 7-63& dissension among shareholders, 7-64B& existing& & valuation of minority interests, 7-57


& importance of, in open market sense, 7-61& internally generated versus externallyfunded prices, 7-63& provision re death of shareholder, 7-64& provision re sale of shareholding in var-ious circumstances, 7-64& put-call clause, 7-64B& restriction on share transfer, 7-64F& right of first refusal, 7-64B& valuation of minority interests, effect on,7-57& valuation of whole business versus se-parate shareholdings, 7-62

Shareholder’s equity& defined, 3-26

Shareholding& minority interest, 5B-99& nuisance value, 7-73

Shares& acquisition of, at discount, 9-86& capital reorganization, fair market valuedetermination, 9-51& cash flow projection differences that re-late to purchase of& date at which fair value should be cal-culated for appraisal remedy, 7-82M& minority holding& & compulsory acquisition of, after take-over bid, 7-105& notional market for& & caveats re special purchasers, 5-25& qualified small business corporate, rulesre, 9-64& redemption amount, 9-35& restrictions on transfer of, 4-34 7-64F& & articles of incorporation and by-laws, 7-66& sale of, 6-89& & acquisition of debt or shares at dis-count, 9-86& & capital dividend account, 9-83& & capital gain or ordinary income, 9-77& & earn-outs, 9-82& & losses, 9-79& & refundable dividend tax on hand, 9-83& & reserves, 9-82& & undeducted investment tax credits, 9-81& & undeducted scientific research ex-penditures, 9-81

& & vendor’s position versus purchaser’sposition, 9-86& & versus sale of assets, 9-71& special& & created for purposes of estate planning,valuation of, 7-155& & introduction, 7-151& & valuation of, 7-152& & voting privileges, 7-154& & widely-held company, 7-151

Shotgun clause& defined, 3-26

Small business deduction& defined, 3-26& tax rate, 9-92& transfer of, non-arm’s length, 9-65

Soft right of first refusal& defined, 3-26

Solicitor-client privilege& protecting, 10-186 to 10-199

Sole proprietorship& conversion to, 9-60

Special interest purchasers& defined, 3-27

Special purchasers& appropriateness of including, in notionalmarketplace, 4-24& caveats re, in notional market, 5-25& consideration in valuation of goodwill, 12-24& effect of, on fair market value determi-nation& & examples, 5-28& & notional market, 5-25& investigation, 10-30.12& real estate valuation, 12-520& who perceive post-acquisition net eco-nomic value-added, 5-19

Special shares& planning of, created for purposes of es-tate planning, 7-155& valuation of, 7-152& voting privileges, 7-154& widely-held company, in, 7-151

Special situations& blockage, 8-11& capital gain/loss, 8-22.4


& cross-holdings, companies, 8-94 to 8-101, see also Cross-Holdings, Companies& earn-outs, 8-21, 8-22.1& joint ventures, 8-47& payments based on production or use,8-22

Spouse trust& rollover of property to, 9-34, 9-37

Spouse(s)& deceased& & application of Family Law Act (Ontario),12-2016& rollover of property to, 9-35& transfers between fair market value de-termination, 9-37

Squeeze-outs& defined, 3-27& types of, 7-105& United State case law, 7-110

Stand-alone value& defined, 3-27

Stated value& defined, 3-26

Stock dividends& fair market value determination, 9-41

Stock exchange& defined, 3-27

Strategic advantages (or benefits)& defined, 3-27

Subsidiary, 90% owned& winding-up of, 9-57

Succession Law Reform Act, 12-2016

Sustaining capital reinvestment& defined, 3-27

Synergies& cumulative, 5C-25& external, 6-70& financial, 6-70& goodwill impairment testing, and, 6-67& intangible operating, 6-70& internal, 6-68

Synergy& defined, 3-27

TT

Tag-along provision (rights)& defined, 3-27

Takeover bid, 7-101& compulsory acquisition of minorityshares, 7-105& defined, 7-101& shareholders’ rights, 7-31& squeeze-out, type of, 7-105

Tangible asset backing& concept of, 5A-35& defined, 3-27

Tangible asset value& overview of asset based valuation tech-niques, 5A-30

Tangible operating synergies& defined, 3-28

Tax benefits& arm’s length disposition to obtain, 9-18

Tax shield& defined, 3-28

Taxation& corporate income tax rates, 9-91& provisions determining fair market valuedetermination, 9-68& & fair market value charitable gifts, 9-70& & fair market value cultural property, 9-69& & fair market value ecological property,9-69& & life insurance, corporate-owned, 9-68& & life insurance, policies, 9-68& provisions requiring fair market valuedetermination, 9-12& & corporate reorganizations, 9-42& & death, deemed disposition, 9-32& & dividends in kind, 9-40& & mark-to-market properties, 9-64& & non-arm’s length loans/indebtedness,9-40& & non-arm’s length transactions, 9-12& & non-arm’s length transfers, s. 160, 9-65& & partnership reorganizations, 9-58& & price adjustment clauses, 9-24& & small business corporation, 9-64& & & public corporation, 9-65& & stock dividends, 9-41& & taxpayer migration, 9-61


& & transfers between spouses, 9-37& & transfers to minors, 9-39& & trusts, 9-41& sale of assets, 9-71& & accounts receivable, 9-72& & depreciable property, 9-73& & earn-outs, 9-74& & interest deductibility, 9-74& & inventory, 9-73& & non-depreciable capital property, 9-73& & prepaid expenses, 9-75& & purchase price, 9-71& & sale of property, less than FMV, 9-76& sale of shares, 9-77& & acquisition of debt or shares atdiscount, 9-86& & capital dividend account (CDA)balances, 9-83& & capital gain, 9-77& & comparison of vendor’s and purchaser’sposition, 9-86& & earn-outs, 9-82& & investment tax credits, 9-79& & losses, 9-79& & reserves, 9-82& & share-for-share exchange, 9-79& & undeducted scientific researchexpenditures, 9-79& & valuation issues related to (RDTOH),9-83

Threshold rate of return& components of, 5B-63& defined, 3-28& integration of concepts of, 5B-78& introduction, 5B-61

Time period& for exercising right of appeal by dis-senter, 7-85

Transaction analysis& guideline acquired companies, 5B-38& public equity market, influence, 5B-38

Transfer pricing& rules, 9-21

Trusts& deemed disposition of capitalproperty, 9-41& disposition of income interests, 9-42

Trustees, control through, 7-14

UU

Undepreciated capital costs& defined, 3-28

United States& appraisal& & factors considered, weighting of, 7-99& appraisal rights, 7-87& & apportioning value among differentclasses of stock, 7-100& & costs of appraisal, 7-99& & interest, 7-100& & stock market exception to, 7-90& & valuation of dissenters’ stock underappraisal statutes, 7-95& blockage, 8-14A& fair market value, defined, 4-21& goodwill, valuation of, 6-32B& non-competition agreements and man-agement continuity contracts, 6-38A& shareholders’ survivorship agreements,7-65& squeeze-outs, 7-110

Unlevered rate of return on equity& defined, 3-28

Unrestricted market& defined, 4-33

U.S. Revenue Ruling (59-60), on goodwill,6-13

VV

Valuation& adjusted net book value as a technique,5A-41& asset based valuation techniques, 5A-30& basic principles of, 5-11& businesses, multi-divisional, 5A-125& & defined, 5A-125& & head office costs, 5A-125& & income taxes, 5A-126& controlling interest, of, 7-34& defined, 3-28& differences arising from different rates,& earnings/cash flow based valuationtechniques, 5A-43& effect of, 10-12& emperial evidence, see Emperialevidence& going-concern valuation


& & asset value considerations in, 5A-32& & tangible asset backing, 5A-35& & & future income tax balances, 5A-36& goodwill& & United States, 6-32B& intangibles, 6-26& issuer bids: accountant’s role, 7-121& issues under Family Law Act (Ontario),12-2018& minority interests, of, 7-46& real estate report (case study), 10-137& report, 10-77& rules of thumb, 5A-97, 12-30& special shares, 7-152& & created for purposes of estate planning,7-155

Valuation assignment& assumptions, 10-208, 10-209& auditor’s report, 10-183& budgets and projections, 10-207& business case study, 10-99& business valuation report (case study), 9-105& business valuation reports, common de-ficiencies, 10-203& checklist, valuation, 10-159& components of valuation report, 10-77& components of valuation study, 10-27& depths of analysis& & business and industry analysis, 10-206,10-207& & scope of review, 10-205, 10-206& draft report, 10-24& economic review, 10-36, 10-173& & financial statement analysis, types of,10-30.12& & quantitative or financial review, 10-30.11& & special purchaser investigation, 10-30.12& engagement letter, 10-23, 10-25, 10-26.1& engagements where written opinion nei-ther requested nor required, 10-156& engagements where written opinion ren-dered, 10-21& final report, 10-25& frames of reference, 10-203, 10-204& & valuation date, 10-204& & value, definition of, 10-203, 10-204& information base, 10-26.6& internal consistency, 10-210, 10-211

& letter of representation, 10-25, 10-139,10-154G& model valuation report& & en bloc fair market value, 10-79, 10-93& & partnership interest, 10-90& & real estate, industrial, 10-137& organization of valuation study, 10-26.3& overview of typical, 10-21& partnership interest, valuation report for,10-90& professional standards, 10-204& qualifications, 10-209& quantitative or financial review, 10-30.11& real estate, industrial, 10-137& special purchaser investigation, 10-30.12& valuation questionnaire, example of, 10-30.13

Valuation date& defined, 3-28

Valuation date liquidation value& defined, 3-28

Valuation Day (V-Day)& defined, 3-28& depreciable property, 9-103& identical properties, 9-105& introduction, 9-101& median rule versus election, 9-101& publicly traded securities, 9-107& shares, prices of, 2-501

Valuation methodology, 10-209, 10-210

Value& adjusted net book value as valuationtechnique, 5A-41& approaches to, 5A-11& & going-concern value approach, 5A-25& & & asset value considerations, 5A-32& & & tangible asset backing, 5A-35& & & & deferred income tax balances,5A-36& & & & details of calculation of shortfall intax shield to purchaser of shares, 5A-40& & & & future income tax balances, 5A-36& & & & tax shield considerations, 5A-38& & liquidation value approach, 5A-11& & & failed businesses, 5A-12& & & holding companies, valuation of,5A-41& & & illustration, 5A-19& & & liquidation-based values, developing,5A-15


& & & liquidation calculations, approachesto, 5A-12& & & non-going-concern businesses,5A-42& balance sheet review and redundant as-sets, 5A-98, see also Redundant assets& comparable transactions and publicequity market, 5B-38& defined, 3-28& earnings/cash flow based valuationtechniques, overview of, 5A-43& excess present, determination of, 5A-62& going-concern, see Going-concern value& goodwill, other measure of (U.S.), 6-34& intangible& & effect of taxes on, 6-91& liquidation-based values, developing,5A-13& & adjusted equity, 5A-14& Ontario Securities Act, under, 7-131& redundant assets, balance sheet reviewand, 5A-98, see also Redundant assets& tangible asset backing, 5A-35& & modified calculations assuming orderlyliquidation, 5A-15

Value in exchange& defined, 3-28

Value in use (or value in continued use)& defined, 3-28, 4-18& real estate valuation, 12-517

Value terms, 4-11

Value to the owner& defined, 3-28, 4-14

Value/price decisions& comparable transactions and publicequity market, 5B-38

Valuer& conclusion, 10-20& distinguished from arbitrator, 10-13& extent of responsibility, 10-17& legal responsibility, 10-17& measure of damages against, 10-19& role as advisor to vendor, 5-23

Vendor& considerations of, in open market, 5-22& informed, prudent, 4-36& open market transactions& & establishing price for business, 5C-10

& & negotiating transaction, 5C-10& sale of shares versus sale of assets, 9-71& valuer as advisor to, 5-23

Vendor take-back& defined, 3-29& deal financing, 5C-30

Vertical analysis& defined, 3-29

Voting agreements, control through, 7-14

Voting, casting, control through, 7-14

Voting privileges& special shares, 7-154

WW

Warranty-type agreements& capital gain/loss, 8-22

Weighted average cost of capital& defined, 3-29, 5B-18& integration of concepts of, 5B-78& introduction, 5B-42& pricing decision, application to, 5B-79

Widely-held corporation& defined, 3-29& special shares, 7-151

Willing buyers& fair market value, 5B-32& & controlling interest, 5B-33& & minority interest, 5B-32& & pool, 5B-34& & synergy, 5B-34& & synergy, impact, 5B-35

Wind-up& defined, 3-29

Winding-up& partnership, 9-59& property appropriated on& & non-arm’s length transaction& & & fair market value determination, 9-16& 90%-owned subsidiary, 9-57

Working capital& changes to, 5A-103& defined, 3-29

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