· ASC 718 Stock Option Expense Report

Similar to how your employee’s salary is a company expense, so too is the value of the equity you issue them. Your accountant can help you determine how to prepare an ASC 718 Report and should review the file you generate in Shoobx before you finalize the company’s financial statements and tax filing(s). For more information about what the ASC 718 is and what makes for a good one, read our blog post.

At the completion of this workflow, Shoobx will generate a Microsoft Excel file (.xlsx) with ASC 718 report calculations. During this workflow, you will need to have data about grants to employees outside of the SIP, your company's list of peer companies, and start and end dates for your reporting period. Please select the step in the workflow listed below for a more detailed explanation about what to expect:

• Getting Started
• Previous Expenses
• Peer Companies
• Reporting Start Date
• Fair Market Value
• Confirm Settings

Reach out to support@shoobx.com if you have questions about this workflow, or read our Practical Guide to ASC 718 for Startups whitepaper for in-depth information about the ASC 718 Report.

Getting Started

The workflow will begin with the "Check For Previous Expenses" screen, asking if your company has previously expensed equity issuances. In order to maintain consistent reporting, if you select "yes," you will need to input the "Accrual Method" you used previously and will need to utilize this same method in your Shoobx report (in order to maintain consistent reporting). Please note that, due to ASC/GAAP requirements, once an ASC 718 Report has been created on Shoobx, you will no longer be able to change the Accrual Method for future ASC 718 Reports.

On this screen you'll need to provide:

• Accrual Method (Straight Line or FIN 28)
• Reporting Span (Yearly, Quarterly, Monthly)
• Annual Dividend Rate
• Whether or not you would like to add your own forfeiture rate
• If you'd like to report your expense by cost center

Enter Previous Expenses

Moving forward in the flow, you will see the grants Shoobx recognizes in your company. You will be asked to enter the amount and date of previous expenses for each grant. If you choose to skip this step, previous expenses will be calculated based on your chosen accrual method. You also have the ability to enter grant-level customizations for each grant. Please confirm with your accountant before making changes to these fields. 

Enter Peer Companies

On this screen, you will be asked to input tickers for your peer companies. Typically these will be the same as the companies that appear on the most recent 409A valuation if one exists. The stock price history of peer companies is required to calculate the volatility of your stock. In order to maintain consistent reporting, enter the same peer companies used in your company's previous ASC 718 Reports.

You can add companies by clicking on the "Add" button and searching for their ticker (for instance, "AAPL" for Apple, Inc.). You'll want to click on the desired company from the drop-down menu and keep adding companies until you have selected all desired peer companies.

Enter Report Start Date

Choose a start date for your ASC 718 Report. The report will cover X months after the start date (depending on your reporting span, specified on the first page of the flow), and cannot overlap with existing reports.

Review Fair Market Value

The Fair Market Value screen of this workflow will require you to review the history of your company's fair market value reports (including the date of the valuation and the valuation price per share). Please add any missing FMV reports on this screen. The Board Consent corresponding to this valuation price per share should also be uploaded.

Confirm Settings

The "Confirm Settings" page will provide an overview of all of the settings you have selected throughout this flow. Moving past this page will produce the ASC 718 Excel spreadsheet. Once the report has been generated you will receive a link to the report via email or can locate it in the company's data room (click into "Stockholder Information > Equity Valuation Reports > ASC 718"). You are responsible for the accuracy of the data and the calculations contained in the file, and it should be downloaded and reviewed carefully.