Proposed Professionalization Of Valuation Analysis Poses An Existential Threat To Valeant

How do you put a price on failure?
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Bill Ackman had better hope his plans to turn Chipotle around pan out, because his biggest investment is about to lose its most important asset: the ability to make up the value of its intellectual property and then secure loans with it.

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The groups are developing a new certification program that would require 30 hours of work, depending on experience, and could cost more than $1,000, according to the AICPA. The accounting trade group is collaborating with the American Society of Appraisers and the Royal Institution of Chartered Surveyors to work out specifics of the program, which could be announced by the end of the year.

The program would set standards for how valuation experts should document their analyses and push a company’s management to defend its own judgments. Better documentation would make auditors more comfortable with estimates, said Martin Baumann, chief auditor for the Public Company Accounting Oversight Board, the government’s auditing regulator….

Drugmaker Valeant Pharmaceuticals International Inc., which has been pummeled by a series woes, including accounting problems, a brush with a potential debt default and investigations by Congress and federal regulators over drug prices. has secured some $11 billion of loans with more than $45 billion in assets.

Almost half of the value of those assets consists of intangibles such as its corporate brand, the brand names of the drugs it sells and patents it acquired through a slew of acquisitions.

Valuation Experts Will Be Held to a New Standard [WSJ]

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