Re: NOL cap (due to M&A) affects "ALL FUTURE" NOLs?
Someone is paying attention! Very good! Section 382 of the IRS tax code only caps the NOL on the acquired NOL and not future NOLs generated. We admit it - we got lazy and didn't break it out since we hope to never generate NOLs in the future. You would modify the formula in G13 (NOL Used to Shelter... Someone is paying attention! Very good!

Section 382 of the IRS tax code only caps the NOL on the acquired NOL and not future NOLs generated. We admit it - we got lazy and didn't break it out since we hope to never generate NOLs in the future. You would modify the formula in G13 (NOL Used to Shelter Income) to:
=MAX(0,MIN(G12,G20,$E$32+G21))

In essence, add back that year's generated NOL so it's not capped.


the point of permanent differences is that the base (GAAP's EBT vs TAX's Taxable Income) is different.
for GW, GAAP's EBT would be reduced. and as such, to derive Taxable Income, add back the GW impairment to get a higher Taxable Income = pay more taxes since no tax deduct on GW amortization or GW impairment Read More

RE: Do you include pension liability in firm value?
Generally, in a standalone valuation context, such as a trading comps analysis, unfunded pension liabilities are not adjusted for. Trading comps attempt to quantify the current market valuation parameters. Unfunded pension liabilities are not considered part of the capital structure as it is not a f... Generally, in a standalone valuation context, such as a trading comps analysis, unfunded pension liabilities are not adjusted for. Trading comps attempt to quantify the current market valuation parameters. Unfunded pension liabilities are not considered part of the capital structure as it is not a form of capital in the equity value, net debt, preferred and minority interest summation to get to enterprise value.

Unfunded pension liabilities would definitely be adjusted in an M&A context primarily as a purchase price allocation - when buying a company, the acquiror would want to make sure the pension is fully funded and so, would deduct unfunded pension liabilities from purchase price or insert a clause that the seller is responsible for paying future liabilities.

However, in extreme cases of unfunded pension liabilities (such as large unfunded liability), one might decide to adjust for it under certain circumstances when calculating current market valuation. However, it really depends on the specific situation and contxt. In such a standalone situation, valuation multiples would not really be affected since unfunded pension liability typically does not hit the Income Statement, but instead through Other Comprehensive Income. Read More

Circular Reference Explained (Summary)
Many folks have asked us to quickly summary in as succinct a manner as possible the reason why a circular reference is required in financial modeling. Recall, a circ is when a cell needs itself to calculate itself. In general, the only reason for a circ is as follows: - End balance of debt and cash ... Many folks have asked us to quickly summary in as succinct a manner as possible the reason why a circular reference is required in financial modeling.
Recall, a circ is when a cell needs itself to calculate itself. In general, the only reason for a circ is as follows:
- End balance of debt and cash needs itself to calculate itself
- Why? to calculate interest expense/income
- We need ending balance to calculate AVERAGE balance
- Avg balance because interest in the real world is calculated using average (both expense and income)
For the detailed explanation, go to our Circular Reference and Excel Iterations explanations on youtube or in your WST Self-Study login.

Now, there are other reasons, including 3-D data tables in which we use self-referencing cells as well as some warrants calculations for in-the-money logic with different tranches. But these are separate decisions that are not part of the "Core Model" which we define as the fully integrated projection model (IS/BS/CF/Debt).

Any additional questions or clarifications, just reply to this post. Read More

RE: Accounting: Files available for Download
sorry, nevermind, I just realized that it is in Part II under Key Ratios.

and by the way, you have a nice way of putting accounting, this is definitely more interesting and applicable than what I remember from the courses that I took in college.

Re: trading comps for private placements, vcs, IPOs?
yes, you'd have to get a database of PIPE deals, etc.
valuation methods for IPO = whatever institutional investors are willing to pay.
that is determined by comps, DCF, etc. everything in the Corporate Valuation course.
but look at LinkedIn - sometimes deals are mis-priced