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
Fair Value of Portfolio Company Investments
This free, guided checker walks your team through the key decision points for Fair Value of Portfolio Company Investments. Answer a few questions to see the likely approach and the evidence to document.
7 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.
Is the investment measured at fair value through the income statement (because the holder is an investment company under ASC 946, or because a fair value election applies)?
Only positions measured at fair value through earnings run through this framework. Confirm the holder's status as an investment company under ASC 946-10-15, or that a fair value election has been made, before applying any exit-price technique to the carrying amount.
Measure the position under the standard that governs its basis and reserve fair value for disclosure or impairment where required.
Official guidance: FASB Accounting Standards Codification
What is the unit of account for the position being measured?
The unit of account for an investment company is the individual investment, not the fund's net assets and not the portfolio company's whole enterprise. Fixing the unit of account first determines whether an allocation across the capital structure is required and which rights and preferences the measurement must capture.
Measure the single instrument as the unit of account. Measure each class at its own fair value, reflecting its distinct rights. Estimate enterprise value, then allocate it to the specific class held.
Official guidance: FASB Accounting Standards Codification
Is this the initial recognition of the investment, or a measurement made close to the acquisition date?
Distinguish the initial measurement from a later reporting date. At acquisition the entry price anchors fair value and calibrates the model; at a later date the entry price is only a starting point that must be updated for the company's performance and market movements since the deal closed.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
Was the entry transaction orderly and at arm's length between unrelated parties, so the price paid represents fair value?
Transaction price is presumed to be fair value at initial recognition unless one of the ASC 820-10-30-3A indicators is present: a related-party deal, a forced or distressed seller, a different unit of account, or a market other than the principal market. If any applies, do not anchor to the entry price; look for other evidence.
Recognize fair value at the transaction price and calibrate the technique to it under ASC 820-10-35-24C.
Official guidance: FASB Accounting Standards Codification
Since the acquisition, or the last measurement date, has the portfolio company completed a recent financing round or secondary transaction in the same or a pari passu instrument?
A recent priced round or secondary sale in the subject instrument is usually the most persuasive evidence of fair value. Screen for one before defaulting to a model, but capture the price, the date, the investors involved, and the specific rights of the instrument that transacted so it can be tested for reliability.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
Is that recent round or secondary transaction orderly, at arm's length, and in an instrument whose rights and preferences match the subject position or can be reliably adjusted for?
Test the transaction against the ASC 820-10-35-54C indicators of a transaction that is not orderly, such as a forced sale, a marketing period that was too short, or a single non-market participant. A new senior preferred round carries preferences the subject common does not, so it usually must be allocated across the structure rather than used directly.
Recalibrate the measurement to the transaction, adjusting for rights, preferences, and timing under ASC 820-10-35-24C.
Official guidance: FASB Accounting Standards Codification
For the calibrated model, which primary valuation approach does the available evidence best support?
Approach selection follows the evidence: use the market approach when there are true comparables, the income approach when cash flows are reliably projectable, and a scenario or option-pricing method for early-stage companies with neither. Whatever the approach, calibrate it so it reconciles to the entry price or the latest round before rolling inputs forward.
Apply market multiples to the company's metrics, allocate to the subject class, and calibrate to prior evidence. Discount the projected cash flows, allocate to the subject class, and calibrate to prior evidence. Allocate a calibrated equity value across the structure with an option-pricing or scenario method.
Official guidance: FASB Accounting Standards Codification
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