Defining Issues | July 2024
Proposed working drafts of two chapters of the AICPA Cheap Stock Guide including guidance on secondary transactions.
The AICPA’s Financial Reporting Executive Committee issued for public comment an early working draft of chapters 8 and 9 of the Accounting and Valuation Guide: Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Cheap Stock Guide).
Valuing transactions in private entity stock can be complex, and the AICPA’s Cheap Stock Guide provides guidance for preparers of financial statements, independent auditors and valuation specialists. The AICPA is planning significant enhancements to the guide, which was last updated in 2013. The working drafts of chapters 8 and 9 are the initial phase of this update.
The working drafts include proposed enhanced guidance on estimating the fair value of equity securities underlying share-based payment awards. They also propose guidance on evaluating and assessing the impact of secondary transactions and repurchases on estimating fair value, and whether those transactions have a compensatory element.
Once finalized, the updated guidance is expected to better align with ASC 820, Fair Value Measurement, and have significant implications to financial reporting valuations of private company securities underlying share-based payment awards.
Resource
Handbook: Share-based payment
Latest edition: KPMG explains in-depth the accounting under ASC 718.
Resource
FASB issues final ASU on profits interest awards
ASU 2024-01 provides four cases illustrating the scope application of ASC 718 for profits interest awards.
Resource
Hot topics in compensation arrangements
KPMG professionals discuss hot topics and current issues in compensation arrangements.
Receive the latest financial reporting and accounting updates with our newsletters and more delivered to your inbox.
Access our accounting research website for additional resources for your financial reporting needs.