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.