409(A) Valuation Reports

[Joshua Tabin]

I just completed a 409(A) for a client and used a great firm that I recommend highly: Arcstone Partners. Here is the contact info:

Bo Brustkern, Managing Director
[e-mail]
1416 Larimer Street, Suite 203
Denver, Colorado 80202
http:///www.arcstonepartners.com
Main 720.259.0450
Fax [phone]

What others firms do you recommend?

[Bo Brustkern]

Josh -- You are a gentleman and a scholar. Thank you for the shout-out.

Seriously, if anyone needs to talk valuation, we're here to listen. We take pride in our work, and we're hell-bent on service. Arcstone serves clients nationwide, and we'd love to introduce ourselves further to the Houston community.

409A / 123R stock option valuations are a strong suit, certainly. Purchase price allocations (FAS 141 / 142) are becoming more important to our clients as the SEC is cracking down on M&A accounting. Give us a ring if you've got an issue you'd like to discuss. Josh was nice enough to include our contact info above :)

[Victor Elgohary]

Thanks Josh for directing me to this site.

I have been helping clients with all the aspects of fair value accounting and 409(A) valuations for a couple of years.

For those of you that are unfamiliar with these FASB and IRS pronouncements, here are some guideposts.

409(A) comes into play for those of you who are working with private companies who are issuing options on the company's stock to its employees. Basically what the IRS has required under 409(A) is that the company now has a burden to demonstrate that it has issued options that are out-of-the money. If options issued to employees have a strike price that are later deemed to have been below the value of the underlying stock when the option was issued, there are pretty draconian results in terms of tax implications for both the employee and the company.

The reason 409(A) is so draconian is that in order to substantiate that options have been issued "under water", the company must establish the value of the stock. In order to do this for a private company you have little choice other than to perform a valuation that meets all the criteria of Revenue Ruling 59-60. Furthermore, if you are a CPA or a CPA is performing the valuation, there are also the criteria outlined by the AICPA under the Statements of Standards for Valuation Services that one must follow. Bottom line, another check list item that needs to be accomplished in a small company that is trying to raise capital and be financially compliant.

The FASB pronouncements that involve fair value accounting (FAS 123, 133, 141(R)/142, 144, 150, 157, 160) are usually enountered where the company is either public (can still be a small penny stock traded on the over the counter market) or a private company that has to produce fully compliant GAAP statements for stakeholders. Lots of stuff going on in this area of accounting that financial people seem generally unaware of and probably need to get up to speed on fairly soon.