Equity Based Compensation
We provide comprehensive valuations for business and legal clients domestically and abroad.
Stock options are often used as part of the purchase price in the acquisition of businesses, and are routinely issued to management as part of a stock option plan. To accurately account for the issuance of options and warrants, a fair value estimate may be required as prescribed in ASC 718 (precodification SFAS No. 123R). When nonqualified deferred compensation plans involve stock or stock options in closely-held businesses, a valuation may be required for tax purposes under 409A.
A common mistake in determining the strike price of an option is the arbitrary use of a company’s book value, or pricing based on a recent capital raise that involved preferred stock or favorable deal-terms. For companies planning an initial public offering, the inappropriate pricing of options in prior years may require a restatement of earnings, which is commonly known as a “cheap stock” issue.
These pitfalls can be avoided by having a comprehensive independent appraisal of the underlying stock to ensure that options are issued with a strike price that is not below fair value. At FairValue Advisors, we provide valuations to address both the tax and financial reporting requirements associated with Stock Options and more complex derivatives.
In today’s world, capital structures are becoming increasingly complex. At FairValue Advisors, we use the most modern and accepted valuation methodologies. For valuations involving complex capital structures, we employ the option pricing model (“OPM”) and the probability weighted expected return model (“PWERM”) as prescribed by the AICPA Practice Aid, as well as Monte Carlo simulation when appropriate.
At FairValue Advisors, our appraisals are used to assist with the issuance of stock options and for the accounting for complex capital structures.
Meet Our Experts
Let's Work Together
Whether you are considering the sale of a business, accounting for acquisitions, developing an exit plan or have a legal dispute, FairValue Advisors has the resources and expertise to address your needs.
With retirement on the horizon for many baby boomers, knowing when to retire and how much money you need is a hot topic for business owners. So, it’s no surprise that business succession and exit planning is “trending” in the legal and finance communities. Oftentimes, a business is an owner’s
If you operate a business, you’ve invested the valuable resources of time and talent, and if you are a business owner, you have invested your hard-earned money. As both investor and investee, you should be doubly focused on increasing the value of your business and being a good steward of
The Value Examiner® is an independent, professional development journal dedicated to the exploration of value and its ramifications for consultants. It is the singular source of timely, technical, in-depth articles written for consultants by practitioners and academics at the top of their respective fields. The distinguished authors bring expertise acquired