Streamlining Financial and Tax Reporting Processes, Completing Accounting Conversion

Financial Intelligence, LLC

Our client is an S&P 500 technology company with over 5,000 global equity plan participants. The outstanding grants have varying terms and conditions and vesting.

There were extensive issues from a concluded option restatement project that impacted its financial and tax reporting. The client was completing a conversion of its equity compensation administration platform from a commercial platform to a broker’s platform. Additionally, due to nonstandard vesting and its static application of its expected forfeiture rate, the client was unable to accurately forecast expense.

Financial Intelligence was engaged to complete an accounting conversion that would resolve all of its expensing, tax and forecasting issues while streamlining its quarterly close process. As part of its goal of cutting one week from its SEC filing process, the company wanted to complete all equity compensation end-to-end calculations by the first business day after its period close.

We converted all of the client’s equity compensation data into our accounting platform and performed reconciliations against the administration platform and against the previous accounting platform. We also designed systemized processes for periodic updating from the broker’s administration platform and for accurate tax reporting that included the restatement impacts.

We analyzed the cumulative effect of the change of methodologies between the accounting platforms and reconciled the deferred tax asset (DTA) roll-forward for each outstanding grant. We provided accounting memos to accompany the calculations as well as audit support to internal and external audit teams.

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.

After working with accounting, tax and finance process owners, we designed customized reports to meet their requirements.  The processes were all impacted by an ongoing global subsidiary restructuring that involved their cost-sharing configuration.

We completed an interim “test” close and each of the process owners and audit teams signed off the results. After the test close, we further customized reports to accommodate requirements that had not been included earlier.

The company successfully completed its next closing as planned. Since that time, the process owners have determined other ways to improve their effectiveness and Financial Intelligence has designed and included other customized reports to meet those needs.

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