The AICPA recently issued a working draft of its Practice Aid, Valuation of Privately Held Company Equity Securities Issued as Compensation which is an update to the original 2004 Practice Aid.  Commonly referred to as the "Cheap Stock" Practice Aid, the update provides non-authoritative, best practice guidance for the valuation of privately held equity securities issued as compensation.  

The draft of the new practice aid is substantially similar to the original, but contains updated information consistent with FASB ASC 820, Fair Value Measurements and Disclosures (formerly FAS 157) and FASB ASC 718, Stock Compensation and FASB ASC 505-50, Equity-Based Payments to Non-Employees (both formerly FAS 123(R).  In addition, the AICPA's updated guidance reflects the evolution of valuation best practices and it includes changes relating to other GAAP and SEC developments.

The new and/or expanded guidance covers topics such as;

·         The fair value of debt for the purpose of valuing equity

·         Controlling versus minority interests

·         Marketable versus nonmarketable interests

·         The back-solve method under the market approach

·         Clarifications to the probability weighted expected return method and the options pricing model

·         Harmonization of disclosures for contemporaneous and retrospective valuations

The AICPA is accepting comments on the working draft until May 31, 2011, and anticipates issuing the final practice aid before year end.  The working draft is available here. 

Mark Zyla will serve as the Chairman of the AICPA's Fair Value Measurement and Reporting Conference that will be held in Las Vegas Nevada on June 6 - 7, 2001.  The conference will kick-off with Zyla's interview of Robert Herz, former FASB Chairman, and will cover financial reporting issues and developments, including those relating to fair value and to valuation professionals. 

Mark will also speak at the conference session entitled Preparing Supportable Fair Value Measurements in a Business Combination: A Valuation Perspective.  He and his co-presenter, Susan Saidens of SMS Valuation and Forensic Services LLC, will provide practical solutions to fair value measurement questions through short case studies.  They will cover:

• Using option pricing models to measure the fair value of intangible assets and employee stock options

Click here to find a video of Mark Zyla discussing additional topics that will be presented at the Fair Value Conference.

Then click here for conference registration information and a video interview of Tony Aaron discussing the current state of fair value for financial reporting that provides additional details on this year's Fair Value Conference.