Valuing Stock Compensation Under Sect. 409A

Description

IRC Sect. 409A and its 2007 final regulations are broad enough to apply to many arrangements that weren't traditionally considered deferred compensation, such as stock options and stock appreciation rights (SARs). As a result, valuation specialists continue to wrestle with many difficult decisions.

Is a company's process for determining fair market value sufficient to exempt stock option grants from Sect. 409A? How should value be allocated among different categories of common and preferred stock compensation? Is the process used consistently, and does it consider all facts and circumstances?

While holders of stock options and rights could face taxes and non-compliance penalties, the 409A regulations have gaps, and on-point guidance from any source is skimpy. Advisors must understand how Sect. 409A affects clients' future option grants and whether to modify outstanding options.

Listen as our panel of valuation and accounting veterans addresses the common challenges in making accurate stock compensation valuation decisions under Sect. 409A.

Outline

1. Background of issue
   1. 2004 passage of Sect. 409A to set rules for deferred compensation plans
   2. April 2007 passage of final IRS interpretive regs
   3. 2004 AICPA guidance
2. Rules for exempting stock options from 409A at issuance
   1. Exempt if issued by qualified issuer, exercisable for issuer’s common stock
3. Determining fair value of stock compensation
   1. For pre-Jan. 1, 2005 options
   2. For options issued between Jan. 1, 2005 and Jan. 1, 2009
   3. For post-Jan. 1, 2009 options
      1. Reasonable valuation method that considers all facts and circumstances
4. Practical difficulties in stock valuation decisions
   1. Allocating value among different categories of stock/options/rights
   2. Evaluating all outstanding options vs. evaluating only newly issued options

Benefits

The panel will arm you to make better valuation decisions in these and other relevant areas:

• Structuring exempt stock compensation: Finding specific exemptions under Sect. 409A or structuring options in a way that complies.
• Determining fair market value: Navigating different standards, depending on the issuance date, for options granted before Jan. 1, 2009.
• Making solid valuation decisions now: Deciding if a current valuation method is reasonable.

Webinar/Teleconference

Strafford webinars/teleconferences offer several options for participation: online viewing of speaker-controlled PowerPoint presentations with audio via computer speakers or via phone; or audio only via telephone (download speaker handouts prior to the program).  Please note that our webinars do not feature videos of the presenters.

NASBA CPE Sponsor

Strafford is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417 or by visiting www.nasba.org.

CPE Credit

Strafford is a NASBA CPE sponsor and our live seminars qualify for CPE credits. They offer you a high quality, cost effective, and convenient CPE option, with no lost travel time or expenses.