Stock Option Valuations - 409A

Jeff Faust, AVA
Director of
Business Valuations

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It is extremely important in today’s regulatory environment that stock options are managed correctly, which includes all the various valuation issues that surround options. Because of this, the valuation analyst must have a working knowledge of stock option plans, in addition to business valuations, in order to be able to take into consideration all the unique factors that options present. The valuation staff at GROCO has extensive knowledge in the design, administration and valuation of stock option plans and can guide you through the regulations that exist.

409A

With the issuance of proposed regulations under Section 409A of the Internal Revenue Code, public and private companies must now follow specific rules on the granting and valuation of stock options. If they fail to follow the rules outlined by 409A, the optionees will be at risk for an immediate tax on their options, including an additional 20%. For clarification, 409A relates to the grant price valuation as opposed to the expensing of options under FAS123.

For more information, go to:

409A Valuation Issues Q&A
Notice 2006-4 Valuation Issues
Notice 2006-79 Extends Effective Date

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