This Guide, authored by expert Neil J. Beaton, focuses on the nuts and bolts of performing valuation and allocation analyses specifically related to Internal Revenue Code 409A. In these types of valuations, metrics and methodologies differ by the stage of investment and the availability of quantitative and qualitative data.

Understanding and identifying the unique variables required to perform a valuation for an early stage company is critical to a well-supported, and ultimately acceptable, valuation opinion. This Guide aims to help valuation professionals gain an understanding of the principles related to these unique valuations, and will provide readers the foundation they need to perform most of the common 409A valuations over a wide variety of economic conditions.

Table of Contents

Chapter 1:
Introduction

Chapter 2:
Initial Work- Characteristics of Early Stage Companies

Chapter 3:
Security Characteristics
Economic Rights Control Rights

Chapter 4:
Overview of IRC 409A Regulations

Chapter 5:
Overview of AICPA’s Original Practice Aid

Chapter 6:
Application of Models Application of the Option Pricing Method
Discounts and Adjustments to Value
Late Stage Valuation: Probability-Weighted Expected Return Method Additional Reading
Be Careful When Pricing Employee Stock Options- By Joel F. Johnson
OPM vs. PWERM--Market Trends and Potential Pitfalls- By Thomas Miller
Telephone Transcript: 409A Compliance - Issues, Approaches and Mistakes Not to Make