This appeal calls into question the actions of a corporate board in carrying out a merger and self-tender offer. Plaintiff in this purported class action alleges that a corporation’s repurchase of shares violated the statutory prohibition against the impairment of capital * * *.

   No corporation may repurchase or redeem its own shares except out of ‘‘surplus,’’ as statutorily defined, or except as expressly authorized by provisions of the statute not relevant here. Balance sheets are not, however, conclusive indicators of surplus or a lack thereof. Corporations may revalue assets to show surplus, but perfection in that process is not required. Directors have reasonable latitude to depart from the balance sheet to calculate surplus, so long as they evaluate assets and liabilities in good faith, on the basis of acceptable data, by methods that they reasonably believe reflect present values, and arrive at a determination of the surplus that is not so far off the mark as to constitute actual or constructive fraud.

   We hold that, on this record, the Court of Chancery was correct in finding that there was no impairment of capital * * *. Accordingly, we affirm.

   * * *. Accordingly, we affirm. Smith’s Food & Drug Centers, Inc. (‘‘SFD’’) is a Delaware corporation that owns and operates a chain of supermarkets in the Southwestern United States. Slightly more than three years ago, Jeffrey P. Smith, SFD’s Chief Executive Officer, began to entertain suitors with an interest in acquiring SFD. At the time, and until the transactions at issue, Mr. Smith and his family held common and preferred stock constituting 62.1% voting control of SFD. Plaintiff and the class he purports to represent are holders of common stock in SFD. On January 29, 1996, SFD entered into an agreement with The Yucaipa Companies (‘‘Yucaipa’’), a California partnership also active in the supermarket industry. Under the agreement, the following would take place:

(1) Smitty’s Supermarkets, Inc. (‘‘Smitty’s’’), a whollyowned subsidiary of Yucaipa that operated a supermarket chain in Arizona, was to merge into Cactus Acquisition, Inc. (‘‘Cactus’’), a subsidiary of SFD, in exchange for which SFD would deliver to Yucaipa slightly over 3 million newly-issued shares of SFD common stock;
(2) SFD was to undertake a recapitalization, in the course of which SFD would assume a sizable amount of new debt, retire old debt, and offer to repurchase up to fifty percent of its outstanding shares (other than those issued to Yucaipa) for $36 per share; and
(3) SFD was to repurchase 3 million shares of preferred stock from Jeffrey Smith and his family.

   SFD hired the investment firm of Houlihan Lokey Howard & Zukin (‘‘Houlihan’’) to examine the transactions and render a solvency opinion. Houlihan eventually issued a report to the SFD Board replete with assurances that the transactions would not endanger SFD’s solvency, and would not impair SFD’s capital in violation of 8 Del.C. §160. On May 17, 1996, in reliance on the Houlihan opinion, SFD’s Board determined that there existed sufficient surplus to consummate the transactions, and enacted a resolution proclaiming as much. On May 23, 1996, SFD’s stockholders voted to approve the transactions, which closed on that day. The self-tender offer was oversubscribed, so SFD repurchased fully fifty percent of its shares at the offering price of $36 per share.

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   A corporation may not repurchase its shares if, in so doing, it would cause an impairment of capital. [Citation.] A repurchase impairs capital if the funds used in the repurchase exceed the amount of the corporation’s ‘‘surplus,’’ defined by 8 Del.C. §154 to mean the excess of net assets over the par value of the corporation’s issued stock. [Citation.]

   Plaintiff asked the Court of Chancery to rescind the transactions in question as violative of Section 160. * * * First, he contends that SFD’s balance sheets constitute conclusive evidence of capital impairment. He argues that the negative net worth that appeared on SFD’s books following the repurchase compels us to find a violation of Section 160. Second, he suggests that even allowing the Board to ‘‘go behind the balance sheet’’ to calculate surplus does not save the transactions from violating Section 160. In connection with this claim, he attacks the SFD Board’s offbalance-sheet method of calculating surplus on the theory that it does not adequately take into account all of SFD’s assets and liabilities * * *. We hold that each of these claims is without merit.

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   Plaintiff advances an erroneous interpretation of Section 160. We understand that the books of a corporation do not necessarily reflect the current values of its assets and liabilities. Among other factors, unrealized appreciation or depreciation can render book numbers inaccurate. It is unrealistic to hold that a corporation is bound by its balance sheets for purposes of determining compliance with Section 160. Accordingly, we adhere to the principles of [citation] allowing corporations to revalue properly its assets and liabilities to show a surplus and thus conform to the statute.

   It is helpful to recall the purpose behind Section 160. The General Assembly enacted the statute to prevent boards from draining corporations of assets to the detriment of creditors and the long-term health of the corporation. [Citation.] That a corporation has not yet realized or reflected on its balance sheet the appreciation of assets is irrelevant to this concern. Regardless of what a balance sheet that has not been updated may show, an actual, though unrealized, appreciation reflects real economic value that the corporation may borrow against or that creditors may claim or levy upon. Allowing corporations to revalue assets and liabilities to reflect current realities complies with the statute and serves well the policies behind this statute.

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   On May 17, 1996, Houlihan released its solvency opinion to the SFD Board, expressing its judgment that the merger and self-tender offer would not impair SFD’s capital. Houlihan reached this conclusion by comparing SFD’s ‘‘Total Invested Capital’’ of $1.8 billion—a figure Houlihan arrived at by valuing SFD’s assets under the ‘‘market multiple’’ approach—with SFD’s long-term debt of $1.46 billion. This comparison yielded an approximation of SFD’s ‘‘concluded equity value’’ equal to $346 million, a figure clearly in excess of the outstanding par value of SFD’s stock. Thus, Houlihan concluded, the transactions would not violate 8 Del.C. §160.

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   The record contains, in the form of the Houlihan opinion, substantial evidence that the transactions complied with Section 160. Plaintiff has provided no reason to distrust Houlihan’s analysis. In cases alleging impairment of capital under Section 160, the trial court may defer to the board’s measurement of surplus unless a plaintiff can show that the directors ‘‘failed to fulfill their duty to evaluate the assets on the basis of acceptable data and by standards which they are entitled to believe reasonably reflect present values.’’ [Citation.] In the absence of bad faith or fraud on the part of the board, courts will not ‘‘substitute [our] concepts of wisdom for that of the directors.’’ [Citation.] Here, plaintiff does not argue that the SFD Board acted in bad faith. Nor has he met his burden of showing that the methods and data that underlay the board’s analysis are unreliable or that its determination of surplus is so far off the mark as to constitute actual or constructive fraud. [Court’s footnote: We interpret 8 Del.C. §172 to entitle boards to rely on experts such as Houlihan to determine compliance with 8 Del.C. §160. Plaintiff has not alleged that the SFD Board failed to exercise reasonable care in selecting Houlihan, nor that rendering a solvency opinion is outside Houlihan’s realm of competence. Compare 8 Del.C. §141(e) (providing that directors may rely in good faith on records, reports, experts, etc.).] Therefore, we defer to the board’s determination of surplus, and hold that SFD’s self-tender offer did not violate 8 Del.C. §160.

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   The judgment of the Court of Chancery is affirmed.