Research Request
Have a question and you can't find the answer?
Send us a Research Request and let our team of academicians help.
|
FAS 123R Continued
Any FAS 123R valuation and expensing compliance plan can be broken down into the following areas:
Data Analysis and Quality
As the most overlooked area in any FAS 123R compliance strategy, the quality and representativeness of the data used in the analysis is typically the missing link for firms who struggle at audit time. Firms can gain tremendously, both in terms of time and cost, by ensuring that their data is in top shape.
Our team of financial engineers, and strategic partners, can help ensure that your data is audit ready, even if you’re changing administrative systems and need to reconcile expense.
Model Selection and Assumption Development
Valuation is more than just the selection of the appropriate model to employee - e.g. lattice vs. Black-Scholes- to which various assumptions, such as volatility and expected term, are plugged. Instead, an auditable valuation requires a deep understanding of items such as, for example, the quality and quantity of grant, exercise, and cancel data and the impact this has upon expected term (BSM) or "in-the-money" (Lattice). Additionally, assumptions such as volatility (implied and historical) and forfeiture rate have fallen under tough scrutiny by auditors. However, with the right processes in place firms can have the answers to these tough questions.
Expensing and Reporting
Although many consultants and providers will argue that firms need additional expensing and reporting help, the vast majority, if not all, of administrative packages sold on the market have reports that will pass audit for most plans. The exception to the rule is in the case of firms issuing Performance-Based Awards. Currently, most of these firms will be relegated to tracking these plans outside of their system. However, solutions are available.
Documentation
The final and most important step in any FAS 123R compliance strategy is a solid, seamless document trail.
Contact us for more information and details on our Section 409A services and how they can provide the level of comfort you need.
