The latest entry from a newcomer to the blogging scene, BVMaven, warns that the IRS will start reviewing Section 409a appraisals on January 1, 2009—and will even “review appraisals going back to when the provision was implemented in 2005.” The BVMaven confirmed this conventional wisdom in a recent conversation with an IRS representative. The conclusion: “As it stands now, we should all be afraid, very afraid,” the Maven concludes, especially in light of the government’s extremely limited guidance on Section 409a compliance, the possible confusion caused by FAS 123R appraisals and the beefing up of the IRS penalty review process.
But it’s not all bad news. The conversation did yield some meaningful editorial comments from the IRS rep. “Basically, when pressed for best practices, the rep emphasized that the review pile will be somewhat divided into those reports which adhere to one or more of the professional standards (USPAP, AICPA, NACVA, etc.) and those that do not.” The latter pile will receive greater scrutiny. “Further, the IRS is leveraging the learning process of the financial reporting community, and as a result will likely embrace things like the equity allocation methods (i.e. OPM or PWERM). If you do these kinds of valuations, you know that’s huge. You also know that means every valuation under current value could be open season.”
As for the BVMaven’s take on the difficulties of doing FAS 142 impairment evaluations, in the current “doom and gloom” economy, see the blog dated October 11, 2008, and entitled, “How About I Impair Your Face?”
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