Employee Incentive Stock Valuation


Paragon provides valuation counsel to corporations for both tax and financial reporting compliance purposes with respect to grants of common stock options and other equity based compensation awarded to employees.  Paragon provides valuation counsel and formal valuation opinions that satisfy the specific fair market value and fair value reporting requirements of the Internal Revenue Service and of financial accounting standards as follows:


  • Fair Market Value Federal Tax Compliance - Section 409A of the Internal Revenue Code                                                    To comply with federal tax reporting of stock based compensation of private companies, the IRS requests an internal or third party professional fair market value opinion of the issuers' common stock  that reflects "the reasonable application of any reasonable valuation method."   Paragon offers such counsel backed by years of experience with private company stock option/restricted stock issuances including companies that are in early stage development as well as proven operating businesses.  Section 409A does not request a separate valuation of the granted employee stock options issued but only of the underlying common stock shares of the granted options.


  • Fair Value Accounting For Stock Compensation Under FASB ASC Topic 718 (formerly SFAS 123R)                             When private or public companies grant stock options or restricted stock to employees, the Financial Accounting Standards Board requires an independent fair value opinion of the common stock options as well as the common stock shares underlying the options.  The analysis of the stock options entails application of one or more stock pricing models including Black-Scholes and binomial models all of which require the fair value of the underlying common shares as one of several inputs.  For private companies (and public companies with inactive trading volume), a separate valuation of the shares is also necessary to satisfactorily comply with stock option financial reporting requirement.  


Paragon is able to package a valuation opinion of a private of public company's stock option program that satisfy the compliance provisions of the Internal Revenue Service (Section 409A) and of the Financial Accounting Standards Board (FASB).


The foregoing valuation services are generally applicable to the following equity based compensation of private and public companies:

  • Restricted Common Stock Units
  • Common Stock Appreciation Rights