Andersen

Andersen

409A/ASC 718 Services

As one of the largest full-service, national valuation practices, we have performed thousands of 409A/ASC 718 valuations for companies of all stages and industries and backed by virtually every major venture capital or private equity firm. In addition, our valuations regularly undergo successful review by all of the major accounting firms. Further, we have considerable experience working with clients through the initial public offering process and addressing the valuation questions raised by external auditors and the SEC staff. 

Section 409A

Under Internal Revenue Code Sec. 409A, a stock option having an exercise price less than the fair market value of the common stock determined as of the option grant date constitutes a deferred compensation arrangement. If your company fails to comply with 409A, your employees could be personally liable for immediate taxation in addition to a 20% penalty tax and potential interest payments. Private company common stock virtually always has value; therefore, obtaining a defensible appraisal is an important step in potentially saving you from unnecessary IRS challenges and saving your employees from unexpected taxes and penalties.

ASC 718

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 requires that all equity awards granted to employees be accounted for at "fair value." Subsequent modifications to outstanding awards result in incremental compensation cost if fair value is increased as a result of the modification. No company wants to restate its historical financial statements to reflect an increase in compensation expense associated with prior equity awards. The key to avoiding these “cheap stock charges” is to understand the accounting rules before making any grants and, when valuing the grants, to make reasonable assumptions that are supported by contemporaneous independent valuations.

Andersen’s valuation services team can help you determine the fair market value/fair value and update the valuation every 12 months, or more frequently if significant changes occur in the business between grant dates (such as new rounds of financing). We have differentiated our valuation deliverable to incorporate additional methodologies prescribed by IRS and expected by external auditors that many other valuation firms fail to consider and address.​