Defining Issues | January 2026
Proposed working draft of the updated AICPA Cheap Stock Guide includes guidance on secondary transactions.
The AICPA’s Financial Reporting Executive Committee issued for public comment a working draft of the updated 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 were released in July 2024 as the initial phase of this update. In December 2025, the full draft update has been released for public comment.
The working draft includes proposed enhanced guidance on allocating value between different classes of securities in complex capital structures and estimating the fair value of equity securities underlying share-based payment awards. This includes proposed 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.
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