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Fairer divorce settlement
A good contact of the firm was in the throws of a somewhat acrimonious divorce after a lengthy period of separation from her chartered accountant husband. Over a business lunch, she explained that she believed that the financial information her husband had provided showed net assets somewhat less than she expected and that did not tie in with her understanding of his lifestyle.
However, he had produced some of his firm’s interim accounts and a copy of the partnership deed which set out how his capital account and profit share were to be calculated.
Financial detective work
Careful reading of the documents determined that his capital account was shown at a level far lower than its true value because of the method used to value debtors and work-in-progress. Goodwill had also been omitted from the valuation. Our investigations also established that the billing profile of the firm increased markedly towards the end of the financial year and thus a projection of his profit share based on the first six months was seriously understating the likely true position. It was also discreetly established from professional sources that there had recently been negotiations to sell the practice at a price which would have resulted in a seven-figure sum being received by this particular partner.
Armed with this information, the wife was able to negotiate a much more beneficial settlement.
