Fresh-Start Accounting Satisfies Auditors and SEC; Proud $200 Million Company Emerges from Bankruptcy
Client: U.S. Textile Manufacturer
Challenge: Help Company Emerge From Bankruptcy with Fresh-Start Accounting
One of the oldest fabric, garment and apparel manufacturers in the United States asked AccuVal to undertake a fresh-start appraisal of its tangible and intangible assets so it could emerge from a debtor-in-possession bankruptcy and resume business as a modern textile company with most of its production capacity overseas.
The bankruptcy court, the company's auditors and, for public companies, the Securities and Exchange Commission all require an independent and supportable fair value restatement of the balance sheet. However, a highly unusual and complicating factor arose. Like many once-thriving American textile manufacturers, this company's assets had been sold to an offshore acquirer who had relocated most of the operating assets to India. Low-cost offshore manufacturers have rapidly replaced the industry, and that affected the domestic value of its machinery and equipment. Essentially, AccuVal had to appraise the assets of a company that no longer existed as of the valuation date, when it emerged from bankruptcy.
AccuVal Approach
Determining the true fair value of such assets required appraisers with significant economic, valuation and financial expertise, as well as and a knowledge of the textile industry. AccuVal met all criteria.
Since a knowledgeable buyer's decision to purchase the assets of the business for continued use would likely be predicated upon the anticipated benefit of future earnings, AccuVal used an income approach to valuation. This approach is a reliable way to determine a business enterprise value because it considers the property's economic utility and captures all elements of physical, functional and economic penalty needed for considering the value of the assets.
To reconstruct the value of the company's fixed assets as of its sale date, AccuVal used data from a previous machinery and equipment appraisal. The firm discussed the equipment's capacities, configurations and physical condition with management, and analyzed historical fixed-asset records. Current market prices were reviewed for textile-making equipment to determine appropriate economic and marketability factors.
Bottom Line: Appraisal Accepted; Company Thrives on Leaner Domestic Operations
Drawing on a its depth of experience, AccuVal promptly and cost-effectively produced a well-documented appraisal that satisfied the reporting requirements of the both the auditors and the Securities and Exchange Commission. The company, whose worth was about $200 million as of the bankruptcy court restructuring, continues to use its remaining tangible and intangible assets to the maximum benefit of its shareholders.
The AccuVal AdVantage™
Decades of experience appraising intangible assets and other intellectual property in a variety of industries, including textiles. Awareness of relevant accounting regulations, coupled with the nature and market for the underlying textile and brand name assets. That's The AccuVal AdVantage™ at work.
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