The ESOP appraisal process is the legal responsibility of the trustee. Learn more about the process in this video.
The ESOP trustee is the owner of the shares and must report the value of the stock annually. The trustee is also required by law to use a qualified independent appraiser if the stock is not publicly traded or readily tradable on an established securities market.
The trustee is responsible for:
- selecting the appraiser,
- the assumptions that the ESOP appraiser uses in setting the value,
- the methods and formulas that the ESOP appraiser uses to calculate the value, and
- the mathematical accuracy of the appraisal report itself.
In recent years, ESOP appraisals have come under great scrutiny for the underlying financial assumptions that support the valuation such as the credibility of projections and the impact of the economy on the company’s business plan on whether or not the value is a prudent valuation.