Accounting Best Practices, Fifth Edition

11–12. Automate Option Tracking

When a large number of employees have company options, either the finance or human resources department will be the target of ongoing questions about the vesting, valuation, and tax implications of these options. Because the tax laws are so complex in this area, employees keep returning with follow-up clarification questions, as well as to run what-if scenarios on what they should do under various circumstances. Given a large number of employees with many option grants, this can turn into a major drain on company resources. In addition, a company runs the risk of giving bad advice to its employees, which may have legal repercussions if employees using this advice lose money through the exercise of options.

A solution for larger companies is to purchase an options tracking package, which they can use alternatively as an in-house solution or as a featured service on the external site of an application service provider. An example of such software is Express Options, which is sold by Transcentive, Inc. The system stores all options information in a single database, allowing one to handle multiple grant types, determine vesting schedules, track option exercises and cancellations, and provide employees with tax-related information. It also calculates option valuations, exports data to the company stock transfer agent, and provides a variety of reports for regulatory purposes. By using Transcentive’s add-on product, Express Desktop, employees can access ...