Valuation & Litigation Advisory Blog

This month’s issue of Valuation & Litigation Advisory Insights includes the following articles:

• Nonqualified Deferred Conpensation: Independent Appraisals Offer Protection Against 409a Challenge
• Damage Control: Surviving a Business Interruption
• Fair Value in a Troubled Economy
   

Nonqualified deferred compensation: Independent appraisals offer protection against 409A challenge         

Businesses that provide employees with stock options, stock appreciation rights (SARs) and other types of nonqualified deferred compensation have been subject to Internal Revenue Code Section 409A for years. As you can imagine, compliance is particularly challenging in the current economic environment. To avoid Sec. 409A problems, options and SARs must be issued at or above fair market value, so accurate valuations are critical. It’s important to know what Sec. 409A requires and how to establish fair market value. Three "presumptive" valuation methods are discussed.

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Damage control: Surviving a business interruption

Whether it’s minor, such as a lightning strike that shuts down production for a day, or major, such as a lengthy labor strike, a business interruption not only reduces income, but also simultaneously creates new expenses. The key to surviving a business interruption is to restore normal operations as quickly as possible. Insurance plays a critical role. This article explains business interruption insurance, how to file a claim, what to do to mitigate loss, and how to establish a loss period. A sidebar addresses scope-of-coverage issues.

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"Fair value" in a troubled economy

Last year, Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 157 took effect. The statement, entitled Fair Value Measurements, provides guidance on measuring fair value for purposes of several accounting standards, and establishes a "fair value hierarchy" that emphasizes market-based valuation methods. This article explains how it works. A sidebar discusses a few opportunities to explore in this down economy.

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