SBC Expense Rollforward
Why does my Prior Expense not reconcile to the previous period's Current Expense?
Many of our clients try to reconcile the "Prior Expense Post-Forfeiture" in the current period to the "Current Expense Post-Forfeiture" in the prior period. We get a lot of questions asking why these two line items never reconcile. The "Prior Expense" column in the current period is actually intended to line up with the "To Date Expense" column in the prior period. The "Current Expense" will take terminations and reversals into account, while the "To Date Expense" will not.
If you would like to reconcile your To Date Expense to your Prior Expense, please follow the instructions below. We will reconcile 2014 to 2015 in this example.
- Navigate to your "Jan-2014|Dec-2014" tab in the 2014 file.
- Select all the data and create a Pivot Table.
- Place "Grant" in the rows and the sum of "To Date Expense Post-Forfeiture" in the values.
- Navigate to your "Jan-2015|Dec-2015" tab in the 2015 file.
- Select all the data and create Pivot Table. Place the pivot table next to the pivot table from step 2 by clicking "Existing worksheet" and selecting the location of the other pivot table.
- Place "Grant" in the rows and the sum of "Prior Expense Post-Forfeiture" in the values.
- Next to the 2015 data, enter a vlookup formula to look up the values from the 2014 table. This will let you reconcile the Prior Expense to the To Date Expense in both files.
- Insert another column at the end to subtract the Prior Expense from the To Date Expense. If the difference is 0 then the numbers reconcile.
What if the yearly numbers in aggregate do not line up?
Whenever an option grant is terminated and expired (e.g. their 3 month post-termination exercise period passes by) within the period, then the option grant will not be included. For example, let's say CS-1 is terminated on 9/1/16 and has a post-termination exercise period of 3 months. CS-1 would have an expiration date of 12/1/16 after the 3 months pass by. Since CS-1 expired in 2016, it will not be included in the 2017 file. The exercise above will allow you to reconcile the numbers on a per-award basis but not in aggregate if you have awards that expired. If you want to include the expired grants in your analysis, you could leverage the 2014 data and pull in the expiration dates of each award. The expirations will show up under the "Grant Life End Date". If the grant life end date is within the same year (e.g. grant life end date is 12/1/14 and the current reporting period is 2014), then the award will not be included in the next reporting period (2015).