Rapidly growing companies often compensate their employees with stock options or restricted stock. For these companies, the accounting profession’s transition to “fair value reporting” has been momentous and sometimes painful. No longer consigned to a footnote, the expense associated with stock options has become a significant determinant of earnings. The fair value of shares underlying options is a subject for close scrutiny by the auditors. Accountants and companies agree that a regular program of common stock appraisals reduces the pain of an audit.

FAS 123R Appraisals

The “Share-Based Payment” statement dictates generally accepted accounting practices for stock options. The first step is to determine the fair value of common shares underlying options issued by the Company. An appraisal from Orchard Partners provides the auditor with the evidence it needs for completing this step.

"Cheap Stock" Appraisals

The issue of “cheap stock” arises when a company files for its initial public offering, and the SEC reviews the pricing of its options prior to the offering. Orchard can assist in preparing for the filing and in responding to inquiries from the SEC.