Introduction .01-.11
Background .04-.08
Scope .09-.10
Information Included in This Guide .11
1 Concepts of Fair Value of Equity Securities .01-.18
2 Stages of Enterprise Development .01-.05
3 Factors to Be Considered in Performing a Valuation .01-.19
4 Overview of Valuation Approaches .01-.55
Market Approach .05-.22
Significant Assumptions of the Market Approach .21-.22
Income Approach .23-.41
Significant Assumptions of the Income Approach .39-.41
Asset Approach .42-.55
Significant Assumptions of the Asset Approach .51-.55
5 Valuation of Equity Securities in Simple Capital Structures .01-.21
Fair Value of Debt for Purpose of Valuing Equity .10-.21
6 Valuation of Equity Securities in Complex Capital Structures .01-.54
Rights Associated With Preferred Stock .09-.13
Methods of Estimating the Fair Value of Multiple Classes of Securities .14-.16
Overall Comments Applicable to All Four Methods for Valuing Equity Securities .17-.20
Considerations Affecting the Selection of a Method for Valuing Equity Securities .21-.54
The PWERM .23-.29
The OPM .30-.41
The CVM .42-.47
Hybrid Methods .48-.54
7 Control and Marketability .01-.33
Controlling Versus Minority Interests .03-.15
Marketable Versus Nonmarketable Interests .16-.33
8 Inferring Value From Transactions in a Private Company’s Securities .01-.15
Chapter Paragraph
9 Relationship Between Fair Value and Stages of Enterprise Development .01-.10
10 Valuation Implications of a Planned Initial Public Offering .01-.10
11 Reliability of the Valuation .01-.20
Postvaluation Events .17-.20
12 Common Valuation Questions
Fair Value of Debt
Q&A 12.1: Using the Book Value of Debt in the Valuation of Minority Equity Securities
Q&A 12.2: Using the Traded Price of Debt in the Valuation of Minority Equity Securities
Q&A 12.3: Using the Zero Coupon Bond Equivalent for Including Debt in the Option Pricing Method
Estimating Equity Value Using the Fair Value of Debt
Q&A 12.4: Impact of Estimating Equity Value Using the Fair Value of Debt When Both the Enterprise Value and Fair Value of Debt Have Declined
Q&A 12.5: Impact of Estimating Equity Value Using the Fair Value of Debt When the Enterprise Value Has Remained Unchanged Valuing Equity Securities in Complex Capital Structures
Q&A 12.6: Current Value Method
Q&A 12.7: Fair Value of Securities Issued by Partnerships and Limited Liability Companies
Q&A 12.8: Treatment of Options in the OPM
Q&A 12.9: Fair Value of Securities in a Roll-Up Structure
Q&A 12.10: Discount Rate Used in the Probability-Weighted Expected Return Method
Q&A 12.11: Measuring Volatility for Early-Stage Companies Control and Marketability
Q&A 12.12: Marketability of Investor Interests
Q&A 12.13: Comparison Between the Fair Value of the Enterprise and the Value of the Enterprise Used for Valuing Minority Interests
Q&A 12.14: Applying Discounts for Lack of Marketability to the Total Equity Value
Q&A 12.15: Discounts for Lack of Marketability and Control When the Enterprise Has a Simple Capital Structure Information to Be Considered in the Valuation
Q&A 12.16: Postvaluation Event (Customer Financial Condition)—Assessment as Known or Knowable
Q&A 12.17: Postvaluation Event (Product Approval)—Assessment as Known or Knowable Chapter Paragraph
12 Common Valuation Questions—continued
Q&A 12.18: Expected Financing—Effect on Valuation Shelf Life of a Valuation
Q&A 12.19: Shelf Life of a Valuation
Q&A 12.20: Shelf Life of Value-Related Information
13 Elements and Attributes of a Valuation Report .01-.16
14 Accounting and Disclosures .01-.18
Accounting .01-.04
Existing Financial Statement Disclosure Requirements .05-.11
Recommended Financial Statement Disclosures for an Initial Public Offering .12-.13
Recommended Management’s Discussion and Analysis Disclosures in an IPO .13
Disclosure Example .14-.18
Background .16-.18
Appendix
A The Initial Public Offering Process
B Venture Capital Rates of Return
C Criteria for the Selection of a Valuation Specialist
D Table of Responsibilities of Management and the External Valuation Specialist
E Table of Capitalization Multiples
F Derivation of Weighted Average Cost of Capital
G Real Options
H Rights Associated With Preferred Stock
I Illustration of Methods for Valuing Equity Securities
J Illustrative Document Request to Be Sent to Enterprise to Be Valued
K Illustrative List of Assumptions and Limiting Conditions of a Valuation Report
L Bibliography and Other References
Glossary
Index of Pronouncements andOther Technical Guidance
Subject Index
