ASC 718 stock-based compensation reporting for startups
What is ASC 718?
ASC 718 is the stock-based compensation reporting standard. When you reward your employees, advisors and other stakeholders equity, the ASC 718 standard is used to expense the fair market value of these awards in your income statement as compensation. This is part of your normal financial reporting process.
Why do you need ASC 718?
In the U.S., your financials are audited to be compliant with the GAAP (Generally Accepted Accounting Principles) standards. The same people that maintain GAAP also maintain ASC 718, so your auditors validate your stock-based compensation expenses using ASC 718.
Having clean, audited and compliant financials makes it easier for you to scale to later stages. They help you pass due diligence and close funding.
When do you need ASC 718?
After your financials become audited, the ASC 718 reportng are run annually on fiscal year end dates. The earlier you start, the easier the process, and you’ll do less catch up work.
How long does it take to get an ASC 718 report?
With your up-to-date data, it takes us 1 week to complete your report.
What data do you need to get an ASC 718 report?
The equity and stakeholder data you already maintain in Captable.io is used to generate the report, so it’s a seamless process with no double data entry. We use the following data:
- Vesting schedules
- Stock option ledger
- Stakeholder ledger
- Stakeholder departure history
- 409As with fair market value history. If you need to update your 409A, we can also generate a new one for you.
- Comparable companies
How do we generate the ASC 718 report?
We calculate the fair value of equity awards like stock options and set assumptions for expected term, volatility, interest rate and dividend yield. Some stock options may have complex vesting schedules like performance and time-based vesting conditions. We incorporate these conditions in our fair values calculations.
For plain-vanilla options we use models like Black-Scholes to determine the fair value of options. For options with complex features and vesting criteria, we use binomial lattice models and Monte Carlo simulation. We detail our methodologies in your report so it’s audit-ready.
We work with our partners like Groots Valuations with decades of Big Four experience to generate your report and support your auditors.
How much does an ASC 718 report cost?
ASC 718 reports and audit support start at $2,000 a year. We can provide you a quote based on the complexity of your cap table. Contact email@example.com to get started.