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Ez Custom Software Solutions, Inc. - ASC 718 Compliance Reporting News
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Black-Scholes at Glance


Did you know that Easy Options/ ESPP Custom is fully compliant with ASC 718 / FAS 123R reporting requirements?

  • Black-Scholes Single/Multiple & Binomial lattice valuation models are implemented  sample

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  • Contact us for custom developed Monte-Carlo simulation for your specific valuation modeling needs (performance with market conditions, TSR valuation)   sample

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  • You may store up to five historical scenarios per grant valuation  sample

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  • Estimate Expected Term using Expected Term by Class report, which allows you to filter records by User fields and get estimate using exercises, canceled, and outstanding options  sample

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  • Calculate Price Volatility from your Prices table and use it as valuation input  sample

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  • Estimate new valuation inputs, required by the ASC 718 / FAS 123R if using binomial model:
    - post-vesting termination rate, specified per year at the valuation forecasts table, and
    - suboptimal exercise factor, specified at the option valuation screen.

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  • New report: Post-vesting Terminations, list options granted From - To that are fully vested and canceled as a result of optionee termination As Of specified date or XX months after the full vest date. At the end this gives a rate (0..1) of total canceled shares divided with total granted shares, to be used as FAS 123R compliant valuation input.

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  • New report: Suboptimal Exercise Factor, shows exercise records with exercise date From - To and lists exercise value vs. option price. It gives factor at the end, used as FAS 123R compliant valuation model.

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  • Variable Valuation - it is possible to specify Forecast with a keyword 'vv' in its name, and with starting valuation date at the end of forecast name. Example: "vvTest 12/31/2004". Then, as a term, user has to specify 'starting term', since system will decrease 'term' whenever new valuation is performed. This also requires that new forecast record exists, on the new valuation date. At the end, we would need price from the Prices table as of valuation date. Example: on 12/31/2004 we have set forecast 'vvTest 12/31/2004' with interest, volatility, div. rate, and term is set to 5 years. Price on 12/31/2004 is $5, while option price is $5. Then, on 3/31/2005 we want new valuation and since the keyword 'vv' is used, system will look for the forecast 'vvTest 3/31/2005' to find interest, volatility, div. rate, it will look into Prices on 3/31/2005, say it is $5.25 (same option price of $5 will be used a second parameter in BS formula), and it will use term of 4.75 years. Whenever user runs a report that requires valuation system does what is described here. It will use reporting end date for the 'as of' date for VV scenario.

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  • Valuation screen contains additional VTerm column (IASB compliance). This can be used for the BS Multiple valuations only. VTerm column allows user to specify term in years per vesting period. Regular BS Multiple requires starting term and then system modifies term by, for example, adding +1 year for each new vesting portion, if the vesting period is per year. Now, it is possible to specify whatever term you want per vesting portion. In addition, forecast record associated with valuation with VTerm column, will be read differently than usual. Usual process is to use row from forecast table based on term. If the term is 4.6 system will use 5th row of forecast data (for interest, volatility, etc). However, this is OK when each new term is at least one year in difference with the previous vesting portion term (regular BS multiple process). But, since user may specify expected term (VTerm) to be 2.5, 3, 3.5, 4 years per each vesting portion (in basic 4yr 25% schedule) - it is impossible to use different volatility, interest rate, for 2.5 and 3 year term since system will use 3rd row in both cases (and 4th row for 3.5 and 4 years). That is how it is with all Stox concluding with 1.24.979. Starting from release 1.45.315 Stox reads the forecast table differently when VTerm and BS Multiple is used - it simply uses first row of forecast data for the first VTerm row specified, second row for the next VTerm row, etc.

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  • Valuation Export - Option Valuation report contains Export button for easy export of valuation data into various file formats for review by external auditors.

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  • Valuation Import - Starting from Stox 1.45.971 it is possible to mark grant record to be omitted from the option valuation - at the option valuation screen there is a check-box saying 'Do Not Calculate Valuation'. If checked, system will use current valuation number and will not calculate it any more. This means you need to calculate it first, or to import valuation into the field called CF Value.

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After you have valued your grants, here are the key reports you can use:

  • Expense Allocation Black-Scholes Multiple (fin28 allocation method)  sample

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  • Expense Allocation Black-Scholes Single/Binomial (ratable allocation method)  sample

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  • Option Activity Summary  sample

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Related are Fully/Primary Diluted Options Outstanding reports:

  • Fully Diluted Options Outstanding  sample

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  • Primary Diluted Options Outstanding  sample

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  • Anti-Dilution/Fully Diluted  sample

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  • Anti-Dilution/Primary Diluted  sample

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System allows you to value stock purchases as well:

  • One Record Per Offering or Per Purchase, Estimated and Actual Contribution Amounts  sample

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  • Purchase Valuations Report  sample

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  • Purchase Valuation Adjustments Report  sample

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Download Valuation Guide in pdf format (0.5MB)


 
ONE EZ PRICE of $999 for 4 integrated modules: Options, Valuation / ASC 718 (FAS123R) / Black-Scholes & Binomial, Insider Reporting, ESPP (click here for details)  Call Tony Seker at 877-707-1585 or e-mail ts@ezCustomSoftware.com
 
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