The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals


Are IPOs the New Down Round?

There’s something about nature that abhors a vacuum. Right now that vacuum seems to be the imbalance between the public and private markets, with the latter attracting maybe too much interest since the credit crisis, at the expense of the former. Blame fair value accounting or Sarbanes-Oxley or the plaintiff’s bar, but it has been some time since being public was actually considered a good thing. With interest running high in the “alternative asset space” and cheap debt for LBOs, the costs of being public have not been particularly worthwhile. This situation is not sustainable, and was never meant to be. Family businesses can stay private forever, but institutional investors eventually need the kind of liquidity that can only come from the breadth of ownership afforded by established public markets. Valuations are never really proven until exposed to bids and asks.

The IRS Equity Compensation Audit Guide

What do IRS examiners look for when auditing filings with equity-based compensation plans? The IRS recently released its Equity (Stock)-Based Compensation Audit Techniques Guide, which offers an opportunity to see how the IRS views equity-based compensation arrangements. The guide is intended to assist IRS examiners, as well as to provide insight to corporate and individual taxpayers. Our overview of the Guide is presented in this post.

New Rules for Goodwill Impairment?

As the end of the year approaches, many companies are preparing for goodwill impairment testing, which frequently takes place in the fourth quarter. And even with some sectors of the equity markets at near-record highs, the potential for goodwill impairment can still be a very real issue for businesses in certain industries. It is against this backdrop that the FASB has proposed some changes to the way companies test goodwill for impairment.

Fairness Opinions and Down Markets

August has become the new October for markets in terms of increased volatility and downward pressure on equities and high yield credit. This year has seen similar volatility as was the case in some memorable years. Declining commodity markets, exchange rate volatility and a pronounced widening of credit spreads finally began to reverberate in global equity markets this year. Declining markets in the context of negotiating and opining on a transaction will raise the question: How do current market conditions impact fairness?

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