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Comments: Private company accounting alternative proposed

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On October 1, Grant Thornton submitted a comment letter to the FASB on the Private Company Council’s (PCC’s) proposed practical expedient related to valuing stock underlying options granted to employees and others. The proposal would allow using an IRS compliant valuation (or 409A valuation) instead of a valuation based on U.S. GAAP requirements. These entities generally obtain 409A valuations for tax purposes and would like to use them for accounting purposes to reduce cost and complexity. In our experience, most of these entities obtain a single valuation report sufficient for both tax and U.S. GAAP; therefore, we do not expect this to have a significant impact on company costs and audit efforts.

We generally support the proposal, but are concerned that because the IRS allows (with some limitations) the use of a 409A valuation up to 12 months old, the valuation might be stale when stock options are granted after time elapses. Although the IRS regulations address this matter, we believe the FASB guidance should address changes in value that might occur during those 12 months.

To read our comments in full, download our comment letter here.