ASC 718

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What's the difference between FMV and FRV?

By Shevaun Cash posted 08-17-2023 15:31


What’s the difference between Fair Market Value (FMV) and Financial Reporting Value (FRV)?


If you use Financial Reporting, then you’ve probably noticed a change: FMVs are no longer called FMVs in your 718 dashboard. In fact, there is no FMV in the dashboard; now, there is FRV. What does that mean, anyway, and why did this happen?


Though the terms “fair market value” and “financial reporting value” are related, they have distinct meanings in different contexts:


  • Financial Reporting Value (FRV): The value of common stock for Financial Reporting purposes within Carta, and the output of the ASC 718 Memo. This FRV will be used by your company in the Black-Scholes Option Pricing Model or Intrinsic Valuation Model as the current value of the underlying stock to calculate stock-based compensation of expense for option grants and restricted shares. 

  • Fair Market Value (FMV): FMV relates to the price at which an asset or property would change hands between a hypothetical willing buyer and seller, assuming neither is under any compulsion to buy or sell, and both have reasonable knowledge of relevant facts. FMV is the output of a 409A valuation.

Many companies have historically utilized  the same value for common stock (the Fair Market Value from the 409A report) for both reporting purposes. However, the US Supreme Court has deemed it reasonable for companies to use different values.

The table below breaks down some basic differences between 409A (FMV) and ASC 718 (FRV).



Tax Report


Used for

409A Valuation

ASC 718 Memo




Issued by


Your company, assisted by Carta

Best practices from

Tax court rulings


Enforced by

IRS & tax courts

Auditors & SEC


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