New accounting standards impacting fair value, whether involving acquisitions, stock-based compensation, derivative accounting, or illiquid securities must be taken seriously. Companies that are not fully compliant are subject to fines, lawsuits and negative publicity. The potential impact on share prices and brand value can be difficult to overcome.
Pluris Valuation Advisors provides valuations that are fully compliant with financial reporting standards. We provide valuations for:
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- Asset impairment accounting
- Stock-based compensation accounting (restricted stock or employee stock options)
- Illiquid securities
- Derivative accounting
- Convertible bifurcation analysis
Fair Value
The Financial Accounting Standards Board (FASB) originally defined the term “fair value” in Concepts Statement No. 7 as, “The amount at which that asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.”
While this definition specifically addresses the value of assets and liabilities, the FASB has held that is also applies to equity instruments.
ASC 820 (FAS 157) validates the importance of using market data for valuations, elevating FASB fair-value guidelines to Level A GAAP. See our “FAS 157 Handbook” for more information.
Because of inherent differences between employee stock options and restricted stock, and their market-traded equivalents, analysts usually rely on theoretical models for ASC 718 (FAS 123R) valuations.
Pluris Valuation Advisors has in-depth experience using both theoretical models and data from comparable transactions to develop valuations that will withstand audit scrutiny. For an overview of how valuation methods for employee securities and investor securities differ, please e-mail us.