Buy Sell Agreement Accounting
For an auditor, fair value may mean that certain valuation discounts should be applied to the value of a non-dominant or “minority” interest. These discounts reflect the non-dominant nature of participation and may also reflect the lack of market capacity of a participation for a private company. When these haircuts are applied, the value of a non-dominant share is significantly lower than that of a dominant share. In order to avoid pitfalls in the design of purchase-sale contracts, contractors should consult with lawyers and accountants as well as business auditors to ensure that the language of the purchase-sale contract is consistent with the intent of the owners and that all owners understand the impact of these definitions. .