Damage Calculation Services In Houston Texas
Due diligence services are investment protection tools, used to assess whether a particular asset is worth investing in. In many cases, due diligence is used to analyze businesses prior to a merger or acquisition (M&A). In doing so, due diligence can confirm the following with the help of forensic accounting:
- The company’s income, balance, cash flows, margins, and debt
- The company’s legal compliance with contracts, leases, intellectual property, and environmental laws
- Whether the company is involved in any lawsuits
- The company’s tax structure and history of tax compliance
- The company’s operational processes, supply chains, and logistics
- The company’s business and marketing plans
More than half of all M&As fail, and the reasons usually have to do with incomplete due diligence – especially where the company’s “soft” factors are involved, such as the quality of management, employee morale, customer loyalty, and relationships between the employer and other parties. Thorough due diligence services will advantageously position companies prior to a transaction and are therefore standard practice for major deals.
How Damages are Calculated in Personal Injury Cases
Personal injury cases often involve an element of negligence, and when calculating damages, the plaintiff’s losses are grouped into three categories: special damages, general damages and punitive damages. Here is a closer look at each:
- Special damages – Special damages are actually what most people think of when they think of a personal injury lawsuit. They include property damage, loss of current wages and earning potential, and medical expenses. Special damages are typically quantifiable.
- General damages – General damages are not quantifiable but are nonetheless some of the most important during a personal injury case. They include emotional distress, pain and suffering and, in the case of wrongful death, loss of companionship. This is usually the most complex aspect of calculating damages for personal injury cases.
- Punitive damages – Punitive damages are reserved for egregious instances of negligence or careless behavior. They’re often applied as a multiplier and greatly increase the award to the plaintiff, in order to prevent similar behavior in the future.
When calculating the above losses, an accountant will use various financial documents to demonstrate damages. Examples include medical bills, repair bills and paychecks.
Calculating Damages for Wrongful Termination Cases
There are several types of wrongful termination cases, including termination due to retaliation, discrimination, violation of legal rights or breach of contract, among others. When calculating damages for wrongful termination litigation, the following factors will be considered:
- Back and front pay – Back wages or future wages lost as a direct result of termination.
- Value of benefits – The economic value of any benefits, including health insurance, retirement accounts and stock benefits – lost as a result of termination.
- Additional compensation, including bonuses – This includes bonuses, commissions and other pay-related perks, such as overtime pay.
In addition to the quantifiable losses above, damages may include qualitative damages like emotional distress related to job loss.
Breach of Contract Damage Calculations
Breach of contract litigation can be enormously complex, therefore there are several types of losses that may be included in a damage calculation. Examples include:
- Compensatory damages – Designed to mitigate the losses caused by the defendant, compensatory damages are divided into a few categories. Expectation interest refers to what would have happened if the defendant had held up their part of the contract and what you have lost as a direct result from the breach. Reliance damages specify the resources spent on the expectation that the contract would be fulfilled. Restitution interest are the ill-gotten gains acquired by the defendant as a result of breaching the contract. Plaintiffs can include these in a damage calculation.
- Liquidated damages – Liquidated damages replace compensatory damages, as they are quantified prior to the contract’s execution and are included in the contract as a term in case of breach. Should either party breach the contract, they are obligated to provide restitution according to the liquidated damages provision.
- Punitive damages – Punitive damages are assessed when a defendant’s behavior suggests dishonesty or egregious negligence when entering into a contract. Every state differs on how punitive damages may be calculated, but they are intended to be harsh enough to prevent similar actions in the future.
Damage Calculations for Error and Omission
Errors and omissions (E&O) cases are filed when a professional service provider offers mistaken guidance or fails to provide a service. Any damage calculation arising from an E&O case is necessarily subjective, as it relies on the nature of the mistake and the service being provided. In general, though, E&O litigation involves one of the following:
- Erroneous advice or guidance – The E&O claim asserts that the defendant offered faulty or misguided advice that led to the plaintiff’s losses.
- Failure to render services – The E&O claim asserts that the defendant failed to complete a task or provide a promised service, which led to the plaintiff’s losses.
- Inaccurate projections or projection-based conclusions – The E&O claim asserts that the defendant provided projections that were grossly inaccurate, and that the conclusions arising from these projections resulted in the plaintiff’s losses.
The Potential Damages of Regulatory Noncompliance
Regulatory noncompliance is potentially expensive for businesses, and those damages go beyond penalties and fees. An accountant can provide an accurate estimation of potential noncompliance damages, which include fees and penalties and the ongoing cost of maintaining poor internal controls.
An accountant can also assess potential qualitative losses, such as the loss of business activity (due to noncompliance actions) and loss of reputation.
Damage Calculations for IP Infringement Litigation
Intellectual property (IP) infringement litigation may involve patents, copyrights or trademarks, and damage calculations may be based on the following:
- The infringer’s profits based on IP infringement. These are appropriated to the IP holder.
- Any profits lost due to IP infringement. This may include lost sales and price erosion.
- Any licensing income lost due to IP infringement.
- Any reasonable royalties or other economic benefits of holding the IP.
When calculating damages, an accountant may use a “but-for” method to specify losses. This method calculates what the IP holder would have earned had the infringement never occurred.
How Damages are Calculated in Fraud Cases
In fraud cases, damage calculations are based on either the benefit-of-the-bargain method or the out-of-pocket method. Here’s the difference:
- Benefit-of-the-bargain method – Using the benefit-of-the-bargain method, the accountant assesses the extent of the damages by calculating the difference between the value of a fraudulent transaction and the value of the transaction as presented by the defendant. For example, the defendant claims that a piece of real estate is worth $500,000 when it’s actually only worth $300,000. The defendant sells the property to the plaintiff for $400,000, a difference in $100,000 between the actual value of the property and what it sold for – but the difference between the actual value of the property and its advertised value ($500,000) is $200,000. When calculating damages using this method, the $200,000 is the cited figure.
- Out-of-pocket method – With the out-of-pocket method and using the above example, the damages would be set at $100,000 – the difference in actual value of the property and what the defendant paid. Out-of-pocket damages are typically easier to calculate, as they rely on hard numbers that can be readily demonstrated.
A Forensic Accountant Can Provide Accurate Damage Calculations for Litigation
Whether you’re a plaintiff pursuing litigation or a defendant organizing a rebuttal, a reputable forensic accountant like Evident Pros can provide precise damage calculation services that just may help your case.