Financial Reporting Valuations: Audit-Ready Fair Value for US Businesses
Independent, defensible valuations under ASC 820, ASC 718, and ASC 805, built to withstand auditor scrutiny and meet GAAP requirements.
Whether you are closing an acquisition, granting stock options, or preparing for a quarterly filing, your financial statements need fair value figures that hold up under review.
Why Financial Reporting Valuations Matter ?
Financial reporting valuations determine the fair value of assets, liabilities, and equity instruments that appear on your balance sheet and income statement. Under US GAAP, fair value is not optional for many line items. It is a requirement enforced through audit, and getting it wrong carries real consequences.
A valuation that does not meet the requirements of ASC 820, ASC 718, or ASC 805 can trigger audit qualifications, financial restatements, or regulatory scrutiny. For public companies, the stakes include SEC review. For private companies, inaccurate fair value can erode investor confidence and complicate future transactions.
The challenge is that financial reporting valuations require specialized expertise. Standard business appraisals do not address the specific disclosure, hierarchy, and documentation requirements that auditors expect. A purpose-built financial reporting valuation gives your finance team defensible numbers, clean disclosures, and a smooth audit cycle.
What We Deliver ?
Equirium Analytics provides a full suite of financial reporting valuation services for US companies. Each engagement is scoped to the applicable standard, the nature of the assets or instruments involved, and your audit timeline.
ASC 820 defines the framework for measuring fair value across US GAAP — both recurring measurements (derivatives, investment portfolios) and non-recurring measurements (impairment, business combinations).
We deliver ASC 820 valuations for financial instruments, contingent consideration, earnouts, embedded derivatives, and portfolio company investments — each with clear hierarchy classification, documented inputs, and sensitivity analysis.
ASC 718 requires companies to measure and recognise the cost of share-based payment transactions: stock options, RSUs, SARs, and performance-based equity awards.
We value equity instruments using Black-Scholes, binomial lattice models, and Monte Carlo simulation — with key assumptions (expected term, volatility, risk-free rate, dividend yield) and supporting rationale your auditors can review directly.
ASC 805 requires the acquirer to allocate the purchase price to identifiable assets acquired and liabilities assumed at their fair values. The residual becomes goodwill.
We identify and value all tangible and intangible assets — customer relationships, developed technology, trade names, non-compete agreements, and in-process R&D — applying MPEEM, relief-from-royalty, and with-and-without methods as appropriate.
ASC 350 requires companies to test goodwill for impairment at least annually, and more frequently when triggering events occur — sustained share-price decline, loss of a major customer, or significant underperformance.
We perform quantitative impairment tests (comparing fair value to carrying amount) and support qualitative Step 0 assessments, plus standalone fair value analyses for indefinite-lived intangible assets.
ASC 820 vs ASC 718 vs ASC 805: Understanding the Differences
| ASC 820 | ASC 718 | ASC 805 | |
|---|---|---|---|
| Purpose | Defines the fair value framework and measurement hierarchy | Measures share-based payment expense for equity awards | Allocates purchase price in a business combination |
| Trigger | Recurring or non-recurring fair value events | Grant of stock options, RSUs, SARs, or other equity awards | Completion of an acquisition or business combination |
| Typical Assets | Financial instruments, derivatives, contingent consideration, investments | Stock options, RSUs, SARs, performance shares | Customer relationships, technology, trade names, goodwill |
| Common Methods | Market approach, income approach, option pricing models | Black-Scholes, binomial lattice, Monte Carlo simulation | MPEEM, relief-from-royalty, with-and-without, cost approach |
| Frequency | Each reporting period (recurring) or as triggered (non-recurring) | At each grant date; expense recognised over vesting period | One-time at acquisition close; updated for measurement-period adjustments |
Understanding which standard applies determines the scope, method, and documentation requirements. In practice, a single transaction (such as an acquisition) can trigger requirements under all three standards simultaneously.
When You Need a Financial Reporting Valuation ?
Financial reporting valuations are required across a range of business events and reporting cycles. If you are unsure whether your situation requires one, a scoping conversation can clarify the requirements quickly.
- Acquisitions and business combinations. ASC 805 requires a full purchase price allocation within the measurement period (typically up to one year from the acquisition date).
- Stock option and equity award grants. ASC 718 requires fair value measurement at the grant date, with expense recognised over the vesting period.
- Quarterly and annual financial close. Recurring fair value measurements under ASC 820 for financial instruments, derivatives, and investment portfolios.
- Goodwill impairment triggers. A significant drop in market capitalisation, loss of a key customer, or major restructuring can trigger an interim impairment test under ASC 350.
- IPO readiness and capital markets transactions. Auditors and underwriters require defensible fair value support for all material line items before a public offering.
- Audit findings or restatements. If a prior valuation was challenged or deemed insufficient, a fresh, independent valuation is often needed to resolve the finding.
Common Financial Reporting Valuation Pitfalls (And How to Avoid Them)
- Misclassifying fair value hierarchy levels. Placing a Level 3 measurement in Level 2, or vice versa, triggers auditor pushback and can require disclosure restatements. Classification should be based on the lowest-level input significant to the measurement.
- Using stale or unsupported inputs. Recurring fair value measurements need current market data. Relying on inputs from a prior period without updating them, or failing to document why an input remains appropriate, is a common audit finding.
- Under-identifying intangible assets in a PPA. Companies sometimes allocate too much to goodwill by not identifying separable intangible assets such as customer relationships, technology, or trade names. Auditors expect a thorough identification process.
- Inconsistent discount rates across periods. When the same asset class is valued in consecutive periods with materially different discount rates and no documented justification, it raises questions about the reliability of the analysis.
- Ignoring impairment triggers until the annual test. ASC 350 requires interim testing when triggering events occur. Waiting until the annual test to address a known trigger can result in untimely recognition and an audit qualification.
Our Methodology
Equirium applies the valuation approach and method that best fits the asset, the applicable standard, and the available data. Our work follows NACVA professional standards and is structured to meet the documentation requirements of major audit firms.
Valuation Approaches
- Income approach. Discounted cash flow (DCF) models, multi-period excess earnings method (MPEEM), and relief-from-royalty models. Used when the asset's value is best reflected by its expected future economic benefits.
- Market approach. Guideline public company analysis and precedent transaction analysis. Used when comparable market data is available and reliable.
- Cost approach. Replacement cost or reproduction cost methods. Applied primarily for tangible assets and certain early-stage intangibles.
Fair Value Hierarchy
Under ASC 820, every fair value measurement must be classified within a three-level hierarchy based on the observability of the inputs used.
- Level 1. Quoted prices in active markets for identical assets or liabilities (e.g., publicly traded securities).
- Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets, interest rate curves, or credit spreads.
- Level 3. Unobservable inputs based on the reporting entity's own assumptions, supported by the best available information (e.g., projected cash flows, discount rates derived from comparable companies).
Correct classification is critical for disclosure. We document the rationale for each classification and identify the significant inputs that determine the level.
Specialised Models
- Black-Scholes and binomial lattice models. For standard stock options and equity instruments under ASC 718.
- Monte Carlo simulation. For performance-based awards with market conditions, complex earnout structures, and contingent consideration.
- Multi-period excess earnings method (MPEEM). For customer relationships and other cash-flow-generating intangibles.
- Relief-from-royalty method. For trade names, technology, and intellectual property where a licensing analogy applies.
- With-and-without method. For non-compete agreements and other restrictive covenants.
- Greenfield method. For assembled workforce valuations and certain infrastructure assets.
How We Work With Your Auditors ?
- Early-stage alignment. Before modelling begins, we discuss the scope, approach, and key assumptions with your audit team. This reduces the chance of methodology disagreements surfacing late in the audit cycle.
- Documentation built to audit standards. Our reports address the specific questions auditors ask: input sourcing, hierarchy classification, sensitivity analysis, and reconciliation to the financial statements. We prepare work papers with Big Four and mid-tier review processes in mind.
- Direct engagement with audit specialists. When your auditor's valuation specialist reviews our work, we engage directly to walk through assumptions, respond to queries, and provide supplemental analysis — reducing back-and-forth cycles.
- Consistency across periods. For recurring valuations, we maintain consistent methodology, discount rate frameworks, and documentation structures. When changes are warranted, we document the rationale clearly so the auditor can trace the evolution.
Whether your auditor is a Big Four firm, a regional firm, or a mid-tier national practice, we have experience working within their review frameworks and timelines.
Why Equirium Analytics ?
Every financial reporting valuation we deliver is prepared by our CVA-led team, led by Harsh Patel (NACVA CVA). What that means for you:
CVA-Led Practice.
Our US valuations are led by a NACVA Certified Valuation Analyst, ensuring every engagement meets recognised professional standards.
Independence.
We operate as an independent valuation firm with no advisory, accounting, or audit relationships that could create conflicts of interest.
Audit-Firm Coordination.
We work directly with your auditors from scoping through final review, reducing friction and accelerating the audit cycle.
NDA-First Confidentiality.
Every engagement begins with a non-disclosure agreement. Your financial data and transaction details are protected throughout.
Turnaround Reliability.
We scope realistic timelines at the outset and deliver on them. For time-sensitive reporting deadlines, we offer expedited options.
Our Process
We discuss the reporting requirement, the assets or instruments involved, the applicable standard, and the audit timeline. A clear scope of work is agreed before we begin.
We provide a tailored information request covering financial statements, management projections, transaction documents, cap tables, and any other inputs specific to the engagement.
We apply the appropriate valuation approach and method, build the model, and run sensitivity and scenario analyses as needed.
A draft valuation report is delivered for your review. We walk through the key assumptions, results, and disclosure implications with your finance team.
After incorporating feedback, we issue the final report with complete documentation, work papers, and supporting schedules suitable for audit review.
We remain available for auditor queries, subsequent-period updates, and any follow-up analysis required during the audit cycle.
Frequently Asked Questions
Ready to Talk ?
If you need a financial reporting valuation that meets US GAAP requirements and holds up under audit, talk to our team. We will scope the engagement, align with your auditors, and deliver defensible fair value on your timeline.