The responsibility of financial executives is to present financial information to shareholders, creditors, and other interested parties in an accurate and fair manner. Companies typically prepare financial statements based on customary accounting standards for these segments of stakeholders. Fair value measurement is required for certain assets and liabilities under these standards. It is particularly important when an independent opinion is needed or when a company does not have the internal expertise and resources to handle the task.
The fair value standards and applications are constantly evolving. Valuations are increasingly being scrutinized by ownership, boards, auditors, and regulatory bodies. Independent fair valuations are often required in order to navigate through this increased scrutiny and ultimately to obtain audited financial statements.
When is financial reporting required to include valuations?
FASB Accounting Standards Codification requires fair value measurements in a variety of circumstances, including:
In the event of an acquisition, to support the allocation of the purchase price
Supporting impairment testing of assets, such as goodwill
Support the fair value measurement of financial instruments that are not actively traded on an organized market
To support disclosure and compensation expenses related to equity-based compensation plans, such as stock options
The KNAV team is well-versed in the accounting requirements underlying the need for financial valuations. We also understand the intricacies and implications associated with the various accounting pronouncements underlying the need for detailed and documented value conclusions.
The following is a brief listing of the types of services we can provide:
- Purchase price allocation (ASC 805)
- Equity-based incentive compensation (ASC 718)
- Financial assets and liabilities (ASC 480/820)
- Impairment testing – Goodwill & Intangibles (ASC 350/360)
- Portfolio company valuation (ASC 820)
- Guarantees and indemnifications (ASC 460)
