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.
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ASC 820 / IFRS 13 Fair Value Measurement
This free, guided checker walks your team through the key decision points for ASC 820 / IFRS 13 Fair Value Measurement. Answer a few questions to see the likely approach and the evidence to document.
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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.
Is the required measurement basis an exit price - the price to sell the asset or transfer the liability between market participants - as defined by ASC 820 and IFRS 13?
Fair value is a market-based exit price, not the entity's intended use, the price it paid, or an intrinsic value. Confirm the governing standard actually calls for fair value, because measures such as value in use or a modified share-based-payment amount look similar but follow different rules.
Measure the item under the standard that actually governs it; the ASC 820 and IFRS 13 exit-price framework does not apply.
Official guidance: FASB Accounting Standards Codification
What is being measured at fair value?
The class of item determines which measurement mechanics apply: only nonfinancial assets are measured at highest and best use, while liabilities and own equity use a transfer-to-a-market-participant notion. Identify the item precisely, because it changes the valuation premise and the inputs you will need.
Test the highest and best use of the nonfinancial asset before pricing it. Identify the market and inputs for the financial instrument. Measure using the transfer notion for the liability or own equity instrument.
Official guidance: FASB Accounting Standards Codification
For the nonfinancial asset, does the highest and best use by market participants differ from the entity's current use of the asset?
Highest and best use is the use that is physically possible, legally permissible, and financially feasible and that maximizes value, tested from a market participant's perspective rather than the entity's intentions. A defensive or non-current use held by the entity does not override a higher-value use available to market participants.
Measure fair value at the market-participant highest and best use, which differs from current use, and disclose that premise.
Official guidance: FASB Accounting Standards Codification
What is the best available market evidence for the item at the measurement date?
The hierarchy prioritizes observable market inputs over unobservable ones, so identify the best evidence before choosing a technique. Availability of a quoted price for the identical item in an active market is what distinguishes a Level 1 measurement from the analysis required at Levels 2 and 3.
Confirm whether the Level 1 quoted price is usable without adjustment. Select a valuation technique to convert the observable inputs into an exit price. Select a valuation technique and develop unobservable inputs from the best information available.
Official guidance: FASB Accounting Standards Codification
Can the entity use the quoted market price for the identical item without adjustment at the measurement date?
A Level 1 input is used without adjustment except in narrow circumstances, and a blockage factor is prohibited even for a large holding. If any adjustment is necessary, or the price is not for the identical item in an accessible active market, the measurement is no longer Level 1 and moves to the technique-and-input analysis.
Measure at the unadjusted Level 1 quoted price and categorize the measurement as Level 1.
Official guidance: FASB Accounting Standards Codification
Which valuation technique best fits the item and the available inputs?
Select the technique or techniques appropriate in the circumstances and for which sufficient data are available, maximizing observable inputs and minimizing unobservable ones. The technique does not by itself fix the hierarchy level; the level depends on the inputs the technique relies on.
Apply the market approach and identify the significant inputs it relies on. Apply the income approach and identify the significant inputs it relies on. Apply the cost approach and identify the significant inputs it relies on.
Official guidance: FASB Accounting Standards Codification
Considering the inputs the valuation technique relies on, what is the lowest-level input that is significant to the entire measurement?
The category of the entire measurement is set by the lowest-level input that is significant to it, assessed by judgement about how much each input affects the result. A single significant unobservable input pulls the whole measurement into Level 3 even when most inputs are observable.
Categorize the measurement in Level 2 and provide the Level 2 disclosures. Categorize the measurement in Level 2 because the significant inputs remain observable. Categorize the measurement in Level 3 and provide the enhanced Level 3 disclosures.
Official guidance: FASB Accounting Standards Codification
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