Valuation of Foreign Entities - Financial Reporting and Tax Purposes

We were engaged by a multi-billion-dollar publicly traded company to provide modeling assistance and valuation for goodwill impairment conclusions of a sizable reporting unit with more than 10 foreign legal entities. Based on discussions with management, we built a 5-year forecast model by legal entity with detailed underlying revenue and costs assumptions. The company was able to quickly react to changing market conditions, whether they related to pricing factors, foreign exchange issues, hiring levels, or others, as it could immediately assess the impact of any of these factors on expected results.

The reporting unit management historically analyzed high-level revenue and cost factors and was not able to easily analyze trouble points when actual results missed the forecasts. Our model provided management the tools necessary to pinpoint issues and isolate potential risk points. The detailed model combined with our goodwill testing analysis also provided management the support required during audit review process. The model was a primary input used for the goodwill impairment testing analysis and provided additional comfort to the company’s auditors during their review process despite a small fair value cushion compared to carrying value.

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