Calculating expected term for input into the Black-Scholes-Merton formula is
perhaps the most audited component of the valuation process. Using the Expected
Term Page you can apply various data specific filters.
1. Enter an apply as-of date. The default is the current date. However, the as-of
date should be changed to the end of the reporting period or last day of the
period you are analyzing. You may also select an as-of date by clicking on the
calendar icon and selecting a date from the calendar.
2. Award Type Filter Selection: This filter allows you to generate a historical
expected term for one or multiple option-type awards. The choices are NQ, ISO
and SAR. The default checked selection is NQ and ISO. Checking the Award
Type allows you to customize the historic expected term for one or a
combination of award types.
3. Select a Filter Type. Using the historical expected term, you may elect to
emphasize certain data, periods of time or particular grants over others in the
expected term calculation. This drop down list provides three options:
- History: Includes all grants uploaded, allowing you to leverage all of the
grant data stored in the system to calculate expected term.
NOTE: Assumed and Modified Grants are not included.
- Grant Window: Enables you to calculate expected term by looking at
historical exercise decisions relating solely to historical grants that occurred
during a given time window. Once selected, a Begin Date and End Date
entry fields is displayed. Enter a specific Begin Date and End Date or click
on the calendar icon to choose dates from the calendar.
- Exercise Window: Analyzes all of the exercises in a given time window,
regardless of when the grant originated. Once selected, a Begin Date and End Date entry fields is displayed. Enter a specific Begin Date and End
Date or click on the calendar icon to choose dates from the calendar.
4. Select Post-vest Cancellations and Expirations in Expected Term
Calculation Filter. If checked, will include settle events in the data stemming
from post-vesting cancellations and expirations - a requirement when
considering expected term under FAS 123R.
5. Select Apply filter for Percentage of Options Settled. If checked, applies to
firms that are in a position where the unexercised options from certain grants
need to be controlled for. If checked, enter the percentage of granted options
that settled. For example, if you run a report on the outstanding options tab
that indicates a large portion of recent grants are affected by unexercised
options, you could choose to only consider in the calculation those grants which
have had in excess of 75% of the options granted, settled.
6. Click the Calculate button. Two sections: Your Selection for Expected Term
from Grant and Your Selection for Expected Term from Vest are
generated. Award Filter Type allows you to view the Award selections made
for the output report being viewed. These sections show summary statistics
based on the groups created on the Create Groups
page via the System page
under the Configure tab.
To save the calculations:
- Click the Save to Selection button. The expected term calculation is
removed from the page and ‘moved’ to the expected term section at the
bottom of the page. The selection also displays the award type for which that
value is applicable. Note: This information can also be seen on the Your
Selection page.
To remove saved calculations:
- Click the red Remove ‘X’. However, be aware that there is no confirmation
before it is removed.
To create the Historical Expected Term from Grant report.
- Click the Audit Report from Grant button.
The report uses any criteria (filter type etc) that may have been entered. The
report displays the grants, award types included, exercises, and post-vest
cancels (if included) used in calculating the expected term from grant. The
report leverages the existing calculations that have already been performed.
The report displays in a spreadsheet view (.csv format).
To create the Historical Expected Term from Vest report.
- Click the Audit Report from Vest button.
The report uses any criteria (filter type etc) that may have been entered. The
report displays the grants, exercises, and post-vest cancels (if included) used in
calculating the expected term from vest. The report leverages the existing
calculations that have already been performed. The report displays in a
spreadsheet view (.csv format).A
To create the Excluded Grant Report.
- Click the Excluded Grant Report button.
The report will display all grants that match the filtering criteria entered but
were excluded because they are assumed and/or modified grants. MPA Grants
will not show up under this report.