Fair Market Value (FMV) for ESOPs: Meaning, Calculation & Tax Impact
In the simplest terms, Fair Market Value refers to an asset’s estimated value if it is sold in the open market today. In the context of Employee Stock Ownership Plans (ESOPs), FMV is the estimated value of the company’s stock on the day. This value is calculated based on the valuation of the company. Valuation, in turn, is typically performed by independent valuers or valuation experts who use various methods to arrive at the FMV, taking into account factors such as the company's financial performance, market conditions, and other relevant data.