ASC 718 – Stock-Based Compensation Reporting

Get audit-ready and GAAP compliant ASC 718 stock expense report from Eqvista.

Stock-based compensation refers to the issuance of equity by a company to its employees. Under ASC 718 guidelines, the rules for accounting and reporting stock-based compensation need to be followed.

ASC 718 – Stock-Based Compensation Reporting

The accounting standards for equity awards, as defined in ASC 718, must be followed by all companies. A short description of the ASC 718:

What is ASC 718?

ASC 718 is a comprehensive standard that requires an accounting of stock-based compensation. The objective of this standard is to include the value of the stock-based compensation in the financial statements. Under GAAP reporting rules, the government wants to identify the expenses created for the equity part of employee’s compensation.

Why do you need ASC 718 reporting?

The reason why you need ASC 718 stock-based compensation reporting is because of the complex rules on how to apply for equity awards. It is very important to have clear and correct guidance on employee stock ownership plans in order to be able to apply the rules and the correct amount of compensation expense. Moreover, it determines the fair market value of stock options before issuing them.

ASC 718 Expense Report Procedure

There are several things you should know when preparing for ASC 718 expense reporting. Depending on the business structure, the complexity of preparing the expense report would increase.

What information will be required?

When preparing the ASC 718 report, the company should follow a few guidelines. Before reporting on stock-based compensation expenses, the following data/information is required:

  • Date of grant
  • Exercise price per share
  • Number of shares or units granted
  • ASC 718 fair value of the consideration received

Expense Reporting Process

To keep up with the compliance, it is important to have a clear understanding of this standard and make sure your accounting team obtains data in a timely manner. Here’s how the expense reporting process works:

  • Business Valuation – The fair market value of the share will be established at the valuation date. It is based on the pricing model and policies of the company.
  • Expenses of the Company – The expenses will be accounted for each year, depending on the number of shares issued and the value attributed to them.
  • Disclosure – The complete disclosure of their required financial statements is necessary to disclose the fair market value of the equity awards.

Time Frame for Preparing an Expense Report

The time frame for preparing an expense report varies on the size and complexity of the company. Usually, it takes 10 to 20 business days to prepare the expense report, but in rare cases, it may take up to 30 days.

What does the expense report include?

In simple terms, the expense report contains all of the stock option grants (both ISO and NSOs) the company has and their vesting schedules, and how many secondary transactions have occurred. Under stock-based compensation reporting, the total expenses are accounted for each year, depending on the number of options issued and the value attributed to them.

This means that companies cannot avoid the ASC 718 expense report. Therefore, it is recommended to comply with the GAAP standards, in order to avoid getting penalized by the government.

Why Choose Eqvista for your ASC 718 Financial Reporting

In order to avoid overstating your profit, it is important to account for all of your expenses. When working with a spreadsheet, properly accounting for alternatives can be a challenging task. It is difficult to keep up with changes in accounting guidance over time. Eqvista can help you with managing your cap table, and expenses that are accrued as you issue options.

  • Audit-ready and GAAP compliant reporting – We will prepare your company’s financial report based on GAAP rules, such as ASC 718. This means you will be able to obtain a timely audit-ready financial statement.
  • Certified team of Experts – Our team has the necessary experience and expertise to provide consulting and accounting services for companies in your industry.
  • Expert guidance and support – We will be at your side from the first day we collaborate to ensure a smooth process. Moreover, our goal is to help you understand the rules and comply with them, including ASC 718 standards.
  • Cost-effective – You will cost-effectively receive our services. In the long term, you will save money and time because ASC 718 financial reporting on your statements becomes easier and faster.

Pricing

Pricing for Eqvista’s ASC 718 reporting is given upon the request of the client. To give you an idea, the pricing varies as follows:

  • For SMEs – The pricing starts from $2,000
  • For Large Corporation – Price starts from $5,000

The pricing is calculated on the basis of the following factors:

  • Option Holders – The pricing is calculated based on the number of option holders.
  • Vesting Plans – It is based on the number of shares that will be issued when vested.
  • Issued ISO/NSO Grants – It is determined by other plans of granting to employees and the number of shares.
  • Secondary transactions – The pricing is calculated based on the number of shares traded in secondary transactions.
  • Previous 409A Valuations – The number of previous 409A Valuations is considered for the pricing.

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