There has been a flurry of comments on LinkedIn about the revised “cheap stock” practice aid (Valuation of Privately-Held-Company Equity Securities Issued as Compensation) recently released by the AICPA. BVWire asked Mark Zyla (Acuitas, Inc.) to comment on the draft.
There are many features of the AICPA Working Draft of the Cheap Stock Practice that will be helpful to practitioners. One of the important accounting issues that is addressed in the AICPA Working Draft is the interaction between ASC Topic 718 (FASB 123(R) Share Based Payments), and ASC Topic 820 Fair Value Measurements (SFAS 157). While Topic 820 specifically “scopes out” Share Based Payments from Fair Value Measurements, the Working Draft advises following Fair Value Measurements, where possible.
Another extremely useful addition in this Working Draft is the detailed illustrative examples of PWERM and OPM methods. These examples should provide additional guidance where there have been advances in practice in recent years. The illustrations include a proper application of the “back solve method” which uses recent transactions of rounds as an indication of value of the entity. The examples in the Working Draft should be very helpful in clarifying situations where there has been diversity in practice with each of these methods.
BVWire readers are encouraged to review the new working draft and submit their informal feedback by May 31, 2011. Send comments by email to Yelena Mishkevich by May 31, or by regular mail to: Yelena Mishkevich, Accounting Standards, AICPA, 1211 Avenue of the Americas, 19th Floor, New York, NY 10036.
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