Good news for FASB (and valuators) on pricing stock options

BVWireIssue #47-4
August 23, 2006

When the Financial Accounting Standards Board first proposed in 2004 that companies treat employee stock options as an expense—business leaders “all but stormed” the rule-makers with letters, public statements and protests, according to an AP article (available at But now it looks like FASB might have been on the right track in adopting the rule, in light of the widening federal probe of “backdating” abuses.

And it looks like business valuators have an even better business opportunity, as per the new FASB rule—and IRS regulation 409A—an “increasing number of private equity backed companies are hiring appraisers to determine the fair market value of their common stock,” says Joel F. Johnson, president of Orchard Partners Inc. (, in a recent issue of M&A Today. Likewise, the AICPA’s 2004 practice guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (, product # 006617) recommends hiring an appraiser when quoted market prices are not available, and when the value is not apparent from arms-length transactions.

Please let us know if you have any comments about this article or enhancements you would like to see.