Independent expert and fiduciary
Independent valuation advice might be required for financial reporting purposes, as a result of the Sarbanes-Oxley Act or under the Institute of Chartered Accountants in England and Wales (ICAEW) guidance on professional ethics, for example:
- Companies are now required to estimate the fair value of the share options that they
grant to employees. IFRS 2 states that they should use an option pricing model.
This could be a binomial lattice model or in some cases the Black-Scholes-Merton option pricing model.
IFRS 2 applies to options granted after 7 November 2002 that had not vested by 1 January 2005 (or 2007 for AIM listed companies).
See actions required
for IFRS 2, and further information on IFRS 2 Training and Share-based payments.
- Where management does not have the expertise to perform a valuation and the amounts involved are material. A member of the ICAEW should only undertake professional work where he has the necessary competence required to carry out that work. A valuation prepared by an independent expert will be required where in-house expertise is not available
- Sarbanes-Oxley prohibits the auditor from providing a tax
valuation opinion where that opinion might later need to be defended in
A conflict of interest might also exist where:
- There is a sale of trust property to a trustee
- There is a transfer of assets between a parent company and its
subsidiary where the subsidiary has an outside minority interest
Angela Hennessey has wide experience of providing advice where a
fiduciary duty exists.
Call 020 8993 8138 for an informal discussion with a valuation
specialist or click below for more
provisions of IFRS 2 / FRS 20
Independence and the Valuer
Independent expert :