Under this safe harbor, the FMV of the debt-for-equity interest will be deemed to be the liquidation value if (1) the debtor partnership determines its partners' capital accounts under Regs.
This article assists the practitioner by analyzing the definition of liquidation value in the literature on valuation.
The premise is that the creditor would therefore not agree to an artificially inflated liquidation value that would help the existing partners avoid COD income.
These two perspectives of investors give rise to two valuation concepts related to timber: liquidation value and holding value.
Holding value represents the DCF of income resulting from retained real property, while liquidation value represents personal property.
Financial maturity, holding value, and liquidation value are illustrated in the following example.
If critics complain that today's historical cost-based financials don't provide adequate information to users of financial statements, what will those same critics say if they're given reproduction cost information when they want liquidation values, or vice versa?
One report gave the liquidation value of the assets in case the banks had to sell them to a third party.
Liquidation values in bankruptcy plans may be understated, and going-concern values may be overstated, since a firm has an incentive to try to convince creditors that the firm is worth more alive than dead.
If firms understate their liquidation values, the liquidation-value-based excess returns will be overstated.
If management has an incentive to underestimate liquidation values when the firm's prospects are poor, then companies that perform poorly relative to their (unbiased) going-concern value estimates should exhibit strong performance relative to their (understated) liquidation values.
The complaint alleges that during the Class Period, defendants misrepresented the Company's liquidation value
and financial condition by making false and misleading statements inflating the proceeds from the sale of its component business.