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Option Expense Data

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Current Accounting Standards Codification, ASC 718 (formerly FAS123r) requires that companies that issue stock-based payments must now determine a valuation and expense these options in their financial statements. To create an appropriate expense for the stock-based compensation, the compensation rate must computed for the service life of each grant for each monthly period and the expense must be net of expected forfeitures. There is a lot of data to track and our Management Tool helps you gather the information and automates the expense apportionment over the service life.

The Management Tool takes existing stock option grant data and computes the expenses net of expected forfeiture rates. All that is necessary is to enter the option grant in the Input section (See Figure 1) along with the option valuation, the service life (in months), the starting period (month/year) and other optional data. There is help text and information windows available to explain each input and key terms.

Figure 1
. Option grant information input. The key inputs include the grant name, the grant valuation (as computed by an appropriate valuation model), the service life (generally the vesting schedule for the grant) and the starting period (fiscal period/month and year the option becomes effective).

You then click the 'Create Annual Expense Sheets' button and the software determines what yearly sheets are required to cover the service life. A window appears informing you of the list of sheets will be created and you confirm the creation and the software creates the sheets. for you (see Figure 2).

Figure 2
. Example list of years the system will create after entering the grant data and clicking the 'Create...' button.

Option Expense Data

The system creates sheets for each year that have entered stock option grant service life. If additional grants are added after a previous creation of annual sheets, only the new service life year sheets are created; the existing sheets will already have the data for the new grants.

You track the grant name, grant date for each grant along with the apportioned expense for each grant in the annual table (see Figure 3). The tracking is presented for monthly periods and is summed quarterly and annually for each grant as well as totalled over all of the grants (see Figure 4). The expense is evenly distributed over the service life for each grant.

Each sheet has a field for expected forfeiture rate entry for each of the twelve periods that allow you to establish your expected forfeiture expense adjustment (see Figure 3). You are also provided with an expected to actual adjustment in the bottom tally (see Figure 4).

Figure 3
. Example expense computation for a selected list of option grants. The expected and actual forfeiture adjustment is applied to the complete tally over all of the grants.

Figure 4. The totals for all grants and provision for adjustment of expected forfeiture rates to actual forfeitures.


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