Designing and Implementing Financial and Tax Reporting for NYSE Spin-off

Financial Intelligence, LLC

Our client is an NYSE-listed company that was spun-off as an independent public company. The company has 19,000 employees with global equity compensation participation. Financial Intelligence was initially engaged to complete and reconcile the conversion of assumed grants (over 40,000 options and restricted stock units and awards) and the database for import into a major broker’s administration platform. Included in this project was implementation of all processes for a global grant immediately after the spin-off was completed.

As a result of project meetings with all internal stakeholders, we were also engaged to create an automated accounting and finance close process to replace the macro-based manual processes utilized by the parent company. Since the client had no existing processes, the entire project had to be completed within its first accounting quarter.

The automated finance and accounting processes included the following deliverables:

► Grant valuations
► Expensing
► Tax accounting to include a roll-forward of deferred tax assets (DTA) by grant
► Common stock equivalents
► Financial statement disclosures
► Expense forecasting
► Dilution forecasting
► Custom designed reports to eliminate the need for manual processes
► Completion of a “mock” close with sign-off by all stakeholders
► Facilitation of internal and external audit reviews
► Completion of all accounting period equity compensation processes by the business day before the client’s first close date.

We formed two project teams – one for the administration work and another for the accounting and finance work. Both projects were completed based on fixed, not to exceed fee agreements.

Our administration team completed the administration conversion within two days after the spin date and the converted database was imported and reconciled within an additional two days. The global grant was also completed in the same month.

Our accounting and finance team created micro historical expense reports and DTA tracking for each outstanding grant using the parent company’s macro manual processes. We reconciled that data to the calculations previously performed at the subsidiary level. We imported the post-spin database (that was exported from the broker’s administration platform) into our accounting platform and calculated the cumulative effect adjustment, by grant, for the change of accounting methods. The team created accounting memos for the conversion processes and provided support for all audit reviews and acceptance.

The team met with each of the client’s accounting, finance and tax stakeholders to assist them in designing their close process and the customized reports to support those processes. We then designed and implemented all aspects of automation to meet the deliverables.

We completed a mock close 45 days after the spin-off was completed and reviewed all reports with the stakeholders. We completed additional customization based on those reviews.

In order to meet the client’s accelerated period close requirements, we employed a dual-period accounting process using data based on a cut-off date one week before the actual close date with system-generated accruals for the last week stub period. Under this process, the stub period accruals are reversed and the actual results from the stub period are “trued-up” in the next accounting period. We included processes to account for material events (grants, settlements or forfeitures) that could occur during the stub period.

In the client’s first quarterly period after it became an independent public company, all accounting reports were completed and provided to the client on or before the business day before its closing date. The client filed its Form 10Q for the period within 30 days after the closing date.

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