IRC 409A Common Stock Valuation
This free, guided checker walks your team through the key decision points for IRC 409A Common Stock Valuation. Answer a few questions to see the likely approach and the evidence to document.
Open the free tool
For owners, CFOs, and deal and reporting teams
Asset (Cost) Approach: Adjusted Net Assets
This free, guided checker walks your team through the key decision points for Asset (Cost) Approach: Adjusted Net Assets. Answer a few questions to see the likely approach and the evidence to document.
6 guided steps
Private in your browser
Official guidance links
Start the free checker
Your free guided checker
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level valuation screening aid for general information only and is not a valuation, appraisal, accounting, tax or legal opinion. A defensible conclusion of value requires a qualified valuation specialist applying professional standards to entity-specific evidence.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Has the premise of value - going concern, orderly liquidation, or forced liquidation - been established for the engagement?
The premise of value is the assumed operating condition behind the numbers. Under a going-concern premise, assets are measured at fair value in continued use; under a liquidation premise, they are measured at net realizable value after costs to sell. Fix the premise first, because it sets the measurement basis for every line on the adjusted balance sheet.
Establish and document the premise of value before applying the asset approach, because it governs how each asset is measured under IVS 104.
Official guidance: International Valuation Standards
Which description best fits the subject entity and the reason the asset approach is being considered?
The asset approach fits entities whose value is anchored in identifiable assets rather than going-concern earnings. It is the default for holding and investment entities, a floor for early-stage companies, and it generally understates a profitable operating company because it excludes internally generated goodwill. Match the entity to the right role before proceeding.
Treat the adjusted net asset method as the primary method and proceed to build the fair-value balance sheet. Use adjusted net assets as a floor of value and proceed to build the fair-value balance sheet. Apply the income or market approach as primary and use adjusted net assets only as a floor, because internally generated goodwill is omitted from the balance sheet. Apply a liquidation premise and measure net realizable value after costs to sell and settlement of liabilities.
Official guidance: International Valuation Standards
Can each asset and liability be individually identified and restated from book value to fair value at the valuation date, with objective support such as appraisals, quoted prices, or market-based models?
The method replaces each historical-cost carrying amount with fair value, measured as the price to transact with market participants at the valuation date. Real property, equipment, marketable securities, receivables, inventory, debt, and off-balance-sheet items each need a documented basis. Without that support the adjusted balance sheet is not defensible.
Identify and appraise the assets and liabilities and gather fair-value support before the adjusted net asset method can be completed.
Official guidance: International Valuation Standards
How should unrecorded or internally generated intangible assets be handled in the adjusted balance sheet?
An adjusted balance sheet must include the intangible assets a market participant would recognize, not only those already on the books. Separately identifiable intangibles are added at fair value; inseparable going-concern goodwill signals that the asset approach alone will understate value. Distinguish the two before concluding.
Identify and value each separable intangible at fair value and include it in adjusted net assets. Focus fair-value work on tangible and financial assets and confirm no separable intangibles are omitted. Use the income or market approach as primary because inseparable goodwill is not captured by the asset approach.
Official guidance: International Valuation Standards
How do embedded income taxes on the difference between the fair value and tax basis of appreciated assets affect the adjusted balance sheet?
The willing buyer of an entity holding appreciated assets inherits the latent tax on those gains, so the adjusted balance sheet may reflect a built-in gains tax liability. The size of and support for that adjustment turn on the entity's tax structure, the spread between fair value and tax basis, and the expected holding period. Document the basis for whatever adjustment is taken.
Quantify and support a built-in gains tax reduction to net asset value. Evaluate a more limited, entity-specific built-in gains adjustment for the pass-through structure. Note that the built-in gains adjustment is immaterial and proceed.
Official guidance: International Valuation Standards
At what level is the interest being valued, and how are control and marketability adjustments handled relative to entity-level net asset value?
Entity-level adjusted net asset value is a control, marketable indication before interest-level adjustments. A non-controlling interest is then discounted for lack of control and marketability, while a governing agreement may impose a different basis entirely. Keep asset-level fair values separate from interest-level discounts so the two are not conflated.
Conclude the adjusted net asset value at the control level and assess any marketability discount. Derive the minority interest from net asset value and apply lack-of-control and marketability discounts separately. Confirm whether a governing agreement or statute overrides fair value before finalizing the adjusted net asset result.
Official guidance: International Valuation Standards
Want a professional to confirm your answer?
Send us your situation and one of our senior CPAs will review it with you - fixed fee, no surprises.
Contact Us