System

Configuration settings determine how option model inputs and option values are calculated, and how data will be displayed on the Valuations page. If you change any settings on this page, be sure to click the 'Save' button at the bottom of the page before moving to another page. If you do not click 'Save', your changes will need to be re-entered. To remove any changes you have made to the default settings, click on the 'Restore Defaults' button at the lower part of the page.

1. Change the time period for the application of your inputs. This feature allows you to choose the level of detail that will be used to calculate the model inputs. The inputs may be calculated and applied on a monthly, quarterly, or annual basis. Choose the level of detail that most closely matches how your company calculates inputs when performing option valuations.

Example: If you calculate volatility on a quarterly basis and wish to apply that volatility assumption to all grants awarded in that quarter, then select Quarterly. On the Valuations page, the grants from your uploaded Grant data file will be displayed by quarter. You may then apply unique sets of inputs to the grants within each quarter.

The highest level of detail for the application of inputs is Monthly. For the selected reporting period, each month and its corresponding grants will appear under a separate tab on the Valuation page, and assumptions will be re-calculated on a monthly basis, by group (If applicable).

The Quarterly setting organizes grants into three-month segments in the Valuation page, and calculates assumptions on a quarterly basis, by group (if applicable). If the selected reporting period is not divisible by 3, the last period will be less than three months. This is the default.

The lowest level of detail for the application of inputs is Annually. One set of inputs is calculated and applied per year, per group (if applicable), and the grants are divided into annual segments on the Valuations page.

2. Choose whether you plan to create valuations for Groups of optionees. This feature allows you to apply different valuation input assumptions to groups of similar optionees. As recommended by ASC 718, the feature incorporates variations in behavior among classes of optionees into the valuations. In order to use this feature, you must upload a Classification File.

- Click on the Create Groups button. The Create Groups page opens. These groups are used on the Valuations page to organize the options for valuation, and the valuation assumptions will be calculated separately for each group.

Tip! Your groups are saved even if the setting is changed from "yes" to "no". Because this setting controls the display of your grants on the Valuations page, you may run various scenarios by turning the groups feature on and off. When “no” is selected, the grants will be grouped by time period only. When “yes” is selected, the grants appear as separate tabs according to optionee groups.

3. Change your FAS 123R adoption date. Enter your ASC 718 adoption date by entering a date in the date field, or by clicking on the calendar icon to select a date from the calendar.

The ASC 718 adoption date specifies the point at which your company adopted ASC 718. The ASC 718 adoption date determines which grant data is selected from the database to apply the ASC 718 pre-adoption date amortization method, and the ASC 718 post-adoption date amortization method.

The adoption date also determines how the expense values are allocated between Pro-Forma values and Book values, and also depending on the ASC 718 Application Method selected.

4. Change your ASC 718 application method. The amortization method selected is used in Expense calculations (Expense Page). Two methods are provided: Prospective (the default) and Retrospective.

5. Select how you want to view groups on the Valuation page. This segment appears only if you’ve set the Group feature to “Yes” (see step 2). This section allows you to change the way groups of grants are viewed and model inputs are applied on the Valuations page.

By time period within each group: This setting organizes your grants first by Groups, then by time period (Monthly, Quarterly, Annually) within each Group according to the time period selection in the Application of Inputs section

By group within each time period: Under this setting, the system organizes your grants first by time period (Annual, Quarterly or Monthly) according to the time period selection in the Application of Inputs section, then by Groups within each time period.

6. Change your FAS 141R adoption date. Enter your ASC 805 adoption date by entering a date in the date field, or by clicking on the calendar icon to select a date from the calendar. This field is optional.

7. Select the Forfeiture Rate application method. The two options available are
1. Static and 2. Dynamic. The Dynamic application of Forfeiture Rates is the
default option.

        Static Forfeiture Rate Method: This method involves estimating a likely
        forfeiture rate and applying that haircut to the expense at every period until
        vest. If the tranche vests, an instantaneous vesting true-up is effected that
        equals the sum of all haircuts up to that point. This results in an expense spike
        at vesting.

         Dynamic Forfeiture Rate Method: This method involves estimating a likely
        forfeiture rate and applying it over the vesting period, factoring for a time-
        based probability of the shares vesting. As a tranche progresses through time
        towards vest, the forfeiture possibility dwindles and this is reflected in lower
        and lower forfeiture adjustments to the expense. At vest, the true-up is
        minimal as the adjustments have been taken smoothed over the tranche's
        vesting life.

8. Select the APIC Pool Balance Method. The two options available are
1. Long Method and 2. Simplified Method. The Long APIC Pool Balance Method is the default option.

Long Method: In this method, companies must carefully review all stock options, grant-by-grant, issued since Dec. 15, 1994. In this review, a business must analyze what the deferred-tax effect would have been if ASC 718 were in effect during that time. It uses that information to determine the opening amount for the APIC pool. To gather this information, most companies should rely on past pro forma disclosures, including the "fair value" of each grant and the history of any disqualified incentive stock options during the same period.

Simplified Method: This method allows a company to establish an opening APIC pool balance by calculating the difference between the following two figures:

The increases in additional paid-in capital recognized in a company’s financial statement related to tax benefits from stock-based compensation, following the adoption of FAS 123 but preceding adoption of ASC 718, and

The "cumulative incremental" compensation expense disclosed during the same period, multiplied by the company’s current blended statutory tax rate when it adopts ASC 718. The blended tax rate includes federal, state, local and foreign taxes.

9. Select the EPS Multiplier to be used for EPS average unamortized expense. The two options available are 1. Instruments Multiplier and 2. Performance Multiplier. Instruments Multiplier is the default option.

A selection for the EPS Expense Multiplier applies to awards that have a Vesting/Payout Condition of Performance (P) or Performance and Market (MP). EPS Average Unamortized Expense will be calculated using the applicable values assigned for the selected multiplier. While expense is accruing during the performance/service period, the selected multiplier will be applied to the base instruments granted to derive the number of contingently issuable shares on which to compute the average unamortized expense. Multiplier values are maintained by effective date, and the values can be provided through a group scheduling process, the MPA Schedule File, or through the user interface.
When an award has a Vesting/Payout Condition of Market (M), the Instruments Multiplier is always used to calculate EPS Average Unamortized Expense.

10. Select the Amortization Method, Forfeiture Rate and Tax Rate Hierarchy Settings. This allows for the control of data that gets used during report generation for Amortization Method, Forfeiture Rates and Tax Rates.

Three levels of data are available for input, namely Account-level, Group-level and Grant-level. The data source for each of these parameters can be controlled using this control.

Standard Hierarchy Processing uses Grant-level first, absent which the Group- level, absent which the default (required) Account-level values will be used.

Ignore Grant Level Specific Definition ignores the Grant-level value (if present), moving directly to the Group-level, absent which the Account-level value is used.

Ignore Group Level Schedule Assignment uses Grant-level first, absent which the default Account-level values will be used.