Stock Based Compensation:
ASC 718: Compensation – Stock Compensation (formerly SFAS 123R)
ASC 505-50: Equity – Share-based Payments (formerly EITF 96-18)
Vantage Point Advisors’ comprehensive understanding of IRC 409A and the accounting standards governing accounting and reporting of grants/issuances of stock options, warrants, restricted stock units, stock appreciation rights and other forms of equity based compensation for both employees and other recipients, enables us to provide a cost-effective and thorough analysis supporting the fair value of such equity instruments Our clients rely on us to provide a valuation analysis and report that survives potential rigorous scrutiny from auditors, tax authorities and others.
Both public and private companies are required to comply with complex regulations, including accurate and supportable value indications for their various classes of equity.
· The IRS will look to 409A to assess the tax treatment of deferred compensation plans and the issuance of discounted stock-based incentives;
· Auditors will look to ASC 718 & ASC 505-50 to assess the accounting treatment of compensation expenses and other stock based expense in lieu of services; and
· The history of stock grants and “cheap stock” will affect retrospective compensation expense for an IPO or sale of the company.
BENEFITS OF AN INDEPENDENT VALUATION
· The opinion of an independent party transfers the burden of proof for "reasonableness" from the company to the IRS.
· A third-party valuation firm can provide valuable support in the event the IRS or outside auditors question the methodology or results.
· Performing in-house valuations is a time-consuming process which deviates corporate management from the vital path of revenue generation and business growth, especially if the valuation is questioned by the company’s audit firm.
Business Combinations:
ASC 805: Business Combinations (Formerly SFAS 141/141R)
Vantage Point Advisors provides independent valuation opinions on the fair value of intellectual property and other intangible assets acquired in a business combination. Our professionals have significant experience in valuation related to SFAS 141, SFAS 141R, IFRS 3, and IAS 38 compliance.
ASC 805 mandates allocation of the cost of a merger or acquisition according to the fair value of the various tangible and intangible assets acquired in the transaction, with the residual allocated to goodwill.
International accounting rules under IFRS 3 also require purchase price allocation to acquired assets, assumed liabilities, and goodwill, although differences with ASC 805 exist.
We estimate the Fair Value of the following Intangible Assets:
· Customer related intangibles, including: customer lists; customer contracts; and customer relationships.
· Intellectual Property, including: trade secrets; patents; In-process R & D; Trademarks and Trade names.
· Contract based intangibles, including: non-compete agreements; franchise agreements; licensing agreements; and employment contracts.
Goodwill and Certain Intangible Assets: ASC 350:
Intangible–Goodwill and Other (Formerly SFAS 142) IAS 36 and IAS 38
Annually/periodically, companies must test their goodwill and certain other intangible assets that are not amortized for impairment. Interim impairment testing is required if certain “trigger events” occur, such as adverse changes in the business climate or market which might negatively impact the value of a reporting unit. At a minimum, companies must perform annual tests for impairment. However, upon meeting certain criteria, some firms may not require a quantitative annual test.
The goodwill impairment tests are two-step. The Step One impairment test compares the fair value of a reporting unit to its carrying value. If the fair value exceeds carrying value there is no goodwill impairment and the test is complete. If not, impairment is indicated, requiring a Step Two impairment test. The Step Two test, which is similar to an allocation of purchase price performed pursuant to ASC 805, quantifies the amount of goodwill impairment.
Vantage Point Advisors provides independent valuations to test and measure the impairment of non-amortizable long-lived assets and goodwill in accordance with the guidance from ASC 805, IAS 36 and IAS 38.
Long-Lived Assets Subject to Amortization: ASC 360-10:
Impairment or Disposal of Long-Lived Assets (formerly SFAS 144)
From time to time, organizations may be adversely impacted by a single event or series of events as well as a decision to dispose of certain assets (“trigger events”). Vantage Point Advisors provides expert advice to determine whether the events or circumstances, which have impacted the entity, implicate ASC 360.
The steps of ASC 360 can be summarized as follows:
· Determine if a trigger event has occurred
· Classify assets or asset groupings as "to be held and used" or "to be disposed of"
· Determine if testing the carrying amounts of assets is needed
· Test long-lived assets for recoverability and impairment
· Determine the fair value of applicable assets
· Measure and recognize impairment loss
Fair Value Measurement: ASC 820:
Fair Value Measurements and Disclosures (formerly SFAS 157)
ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Of note, this Statement requires consideration of the exit price paid (if liability) or received (if asset) in a hypothetical transaction in an orderly market (i.e., not a forced liquidation or sold under duress).
Vantage Point Advisors provides valuations to assist companies with their fair value measurements and disclosures. In accordance with ASC 820, a three-tiered hierarchy for inputs for fair value measurement is employed. Level 1 inputs are quoted prices for the identical assets in active markets. Level 2 and 3 assets require companies to perform considerable work to determine the fair value for instruments such as investments in: private companies, hedge funds, interest rate swaps, and derivatives.
Fair Value Determination ASC 820 (previously known as SFAS 157)
Vantage Point provides business valuation and appraisal services in conformity with the promulgations of ASC 820, as applied to valuation of investment portfolios or for valuing companies relating to the compliance with ASC 350, ASC 360, ASC 718, and/or ASC 805.
ASC 820 is a relatively new accounting standard that creates a single definition of fair value and provides guidance on how to measure the Fair Value of a company’s assets or underlying investments and liabilities including appropriate markets, pricing inputs and reliance, market hierarchies, market participants, implementation dates, etc. Based on ASC 820, assets and liabilities must be marked to fair value on no less than an annual, and in most cases a more frequent basis, for investor and financial reporting purposes. ASC 820 promotes consistency in Fair Value measurements.
ASC 820 has prompted the need for many entities such as private equity funds, venture capitalists and hedge funds, to provide investors with transparency on a timely basis, which in turn has made the need for third-party valuation experts like Vantage Point to value their assets or review their internal valuation work, that much more critical.
SFAS 157 was issued by FASB in September 2006 with the goal of: clarifying the definition of fair value; providing a measurement framework for various classes of assets and liabilities; and improving disclosure requirements. SFAS 157 was effective for financial instruments in 2008 (for calendar year-end companies) and non-financial items as of January 1, 2009. SFAS 157 created a three-tiered hierarchy for inputs for fair value measurement. Level 1 inputs are quoted prices for the identical assets in active markets. Level 2 and 3 assets require companies to perform considerable work to determine the fair value for instruments such as investments in: private companies, hedge funds, interest rate swaps, and derivatives.
