Since the issuance of ASC 718 (formerly SFAS 123R) in 2004, valuing stock-based compensation ("cheap stock") has been a significant challenge for private companies. The final version of the revised AICPA Guide, Valuation of Privately-Held Company Securities Issued as Compensation, is the culmination of four years of effort, updating the original 2004 publication by the same name to reflect best practices developed over the previous decade. In this webcast, representatives from the Task Force that updated this guide will discuss the key topics covered in the revised guide, including:
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• New chapter which provides a framework for evaluating private and secondary market transactions
• What should companies do when transaction activity doesn't match their estimates of value?
• New chapter which discusses adjustments for control and marketability -- How should companies think about the value of the enterprise for the purpose of valuing minority securities? When is it appropriate to apply a discount for lack of marketability, and how should the estimated discount be supported?
• New discussion on highly leveraged entities -- How should companies incorporate the fair value of debt in the valuation of equity securities? What is the impact of leverage on the expected volatility of various securities.
• New discussion on the relevance of ASC 820 (SFAS 157) to cheap stock issues