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What is a 409A Valuation and Do I need It?

Click here for FAQs.

"409A" refers to a set of IRS rules and regulations related to deferred compensation. Company's that issue stock-based compensation, such as stock options, can run afoul of these regulations if they set the exercise price of stock options below fair market value at the time of grant, exposing employees to potentially significant unexpected penalties and taxes.  A 409A Valuation Report properly prepared by a CVA, demonstrates compliance withe these rules and regulations, and addresses potential risks relevant to auditors, lenders and potential investors or buyers.

Please see below for a summary of 409A Valuation services provided by D. Brooks and Associates.

409A Valuations

Owner Objectives

Operations Analysis

Capital Structure


Industry Analysis

Comparable Sales

Discounted Cash Flows

Financial Statement Audit Support

US GAAP and IFRS Accounting Expertise

Quality Control Structure Enhances Supportability of Reports


Detailed Report s Prepared in Accordance with USPAP, AICPA and NACVA Standards.

Prepared by CPAs and CVAs

US GAAP, Fair Value  Expertise 

Excel Workbooks Provided for Auditor Testing


Fair Market Value

Performed by  CPAs and CVAs with Over 50 Years Experience

Click here or call (561) 429-6225 to schedule a free consultation.

Why D. Brooks and Associates?

Demonstrates Compliance with 409A

Narrative Report Tells the Company's Story.

Frequently Asked Questions

Do I need a 409A Valuation if my company Recently Sold Sstock? If the Company recently sold common stock and has a simple capital structure (i.e. one class of equity), then a recent sale to an unrelated party may be adequate to support the pricing of stock options.  If the company recently sold preferred stock, and the options are to acquire common stock, an allocation method such as the option pricing method can be used to figure out the fair market value of the of the common stock underlying the options.

Does a Private Company need a 409A? While the IRS does not require a company to obtain a valuation report from an independent specialist, a private company that has issued stock options and does not have recent sales of shares identical to those underlying options should engage an independent specialists to address risk of non-compliance that could adversely impact employees, auditors, investors, creditors and owners. 

Can I use the 409A Valuation Report for Financial Reporting? Yes, except in rare instances, the conclusions reached in the 409A Valuation Report would not differ from a conclusion of value reached under the fair value (US GAAP) standard of value.  The report should include sufficient information and date to allow for a financial statement auditor to perform adequate audit procedures related to amounts include in the financial statements and disclosures.

Can I use the 409A Valuation Report to determine a sales price for my business? No.  While the information and conclusions reached are relevant to the Company's over all value. there are additional factors that should be analyzed in degerming a potential sales price of the entire eEnterprise, including but not limited to, potential buyer synergies, deal structure, operational efficiencies, and seller objectives.  See our seller assistance page here.


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