What is Fair Value?

What is Fair Value?

In the world of ASC 718, the meaning of fair value gets narrowed down to the measurement of equity awards. The Financial Accounting Standards Board (FASB) requires that all equity awards granted to employees and non-employees be accounted for at fair value.

At Carta, the Black Scholes option pricing model is used to calculate fair value. The Black Scholes model has various fixed inputs and assumptions respected by market participants. This model is a commonly-used standard in the finance industry.

What are the inputs?

Including, but not limited to:

• The exercise price of the option

• The fair market value of the stock

• The expected term of the option

• The expected volatility of the stock

• The expected dividend yield

• The risk-free interest rate

Where can I find my fair value?

Lots of places! You can download the SBC Summary Expense report or the Min. Disclosures report to explore the fair values attributed to the awards that your company handles. Check out the following tabs on your spreadsheets to find fair value:

• Tranches

• Option Values

• Granted

• Intrinsic Values (if applicable)

Have more questions on fair value? Post below and we will be happy to answer!

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Shevaun Cash
Financial Reporting Analyst
Carta
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