Monday, August 27, 2012

Equity Edge: Saving a Copy of Expense Allocation - Recognition - Audit Export View

How many of you who are Equity Edge users consistently save off a copy of your Audit Export view of the Expense Allocation - Recognition report EACH reporting period?

If not, I'd highly recommend you get into the habit, it will ease things greatly if/when you ever get into a circumstance where you have to "prove out" how the estimated forfeiture rate was being applied to your expense.

We are helping a client convert systems and this very sort of question has arisen, but of course the client doesn't have the supporting detail from their old system, only the summary and can only show the forfeiture rate applied at the group level. We can still get the job done, but the soft copies of the details of the application of the forfeiture rate would reduce the amount of effort significantly.

This "Audit Export" report view feature was added in 7.0 or 7.1, I can't remember which. And is a terrific tool for a wide variety of reasons. You can audit nearly ALL of the report calculations with the data on the report. And the exceptions to that "almost all" rule are very rare exceptions. No more "black box" expensing, you can see exactly HOW and WHY Equity Edge calculated the expense that it did. Easy, peasy, lemon-squeezy.

If you have leading zeros on your grant numbers:
Remember to save the export into CSV format, not XLS or XLSX. Then rename the CSV to a .TXT extension before you open it will Excel so that the Text to Data wizard will open automatically and you can then specify the "text" data type for the Number column so that you preserve those leading zeros on your grant numbers.

Friday, August 24, 2012

Options Cancelled Report in Equity Edge - Vested or Unvested?

Question:
Off the top of your head, do you know if there is an easy way to tell “forfeitures” (cancel pre-vest) from “cancellations” (cancel post-vest) on an Equity Edge report?

Answer:

On the Options and Awards Cancelled Report, there is a field in the ROT that has a U for unvested at cancel and a V for vested, so you can do a custom report (in Crystal) that adds that field. Or, if you are using Equity Edge Online, you can quickly and easily add that field using the report customization tool.

OOOR… you can use the Forfeiture/Post-Vest% Rates Reportr which has both cancelled after vest and cancelled before vest and gives you vest date AND “shares forfeited” so that might be an easier way to go?

Thursday, August 23, 2012

ESPP Rollout Lead Time & WOO Reports in Equity Edge

Hello all, yes, I've decided to start a blog on equity compensation. I get a lot of interesting questions every week, both from clients and friends, and I thought it might be "fun" to try to share the answers. I will not be blogging on a regular schedule, but only when time allows (and it doesn't allow all that often, actually, I'm procrastinating over a DTA balance calculation right now...). But here we go...

Two interesting and very different questions today:
Question 1:
Can we roll out our US and international 423-equity plan in two weeks? (The offering would start in two weeks, open enrollment would need to start next week.) We've actually gotten this question from TWO clients in the last couple of weeks...

Answer:
Well, you MIGHT be able to, if you already have all the input from international legal counsel and you have your stock plan provider set up and ready to go and have all the other dozens of ducks in a row... but, we generally recommend three to six months of preparation (and a good deal of employee education before you open enrollment). And, we've had many clients roll out ESPP to US participants FIRST and then worry about international, since international is fraught with challenges, and definitely requires specialized legal advice.

Question 2:
In a post FAS 123R-adoption world, when running my WOO (diluted EPS) reports in Equity Edge, should I choose "APB 25" or "FAS 123" for the "Expense" report parameter?

Answer:
Post 123R you should select FAS 123 since you want to include expense in both the average unamortized expense buyback shares and in the tax benefit buyback shares because you are under FAS 123R and you have expense, unlike under APB 25.

On the Equity Edge WOO reports, setting "Expense" to "APB 25" will give you zero expense in two pieces of the Treasury Stock Method calculation which will generally overstate dilutive shares; so you are cheating yourself out of some buyback shares.