BVR's Practical Guide to Valuation for IRC 409a

This practice aid focuses on the "nuts and bolts" of performing valuation and allocation analyses specifically related to Internal Revenue Code §409A ("§409A"). The broad scope of this new Code section provides that, unless certain requirements are met, amounts deferred under a nonqualified deferred compensation plan will be currently includible in income and subject to an additional 20% excise tax. Since there are many complexities involved in performing such valuations, and instead of muddying the waters with esoteric discussions about the proper treatment of specific issues, this guide provides a solid foundation for the reader to perform the most 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