March 29, 2011
Volume 4, No. 3

In this Issue:

Helping Hands

Market Research Survey

Consultant Corner

SOS Accounting Answers

Free SOS Educational Webcast - Insider Edition: Best Practices and Emerging Issues

SOS Spotlight - News and Notes About the People of SOS

SOS Product Spotlight - People Interim Staffing

NCEO Volunteer Opportunity

SOS Across Our Desk

SOS Xposé

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SOS Xtranormal Participant 6039 Education Videos:

SOS Employment Opportunities
From the SOS Xtra Archive:

ESPP for Everyone!

A recorded demo of "Email Xpress", the SOS automated solution for emailing participant stock plan confirmations and statements, is now available:

Email Xpress Demo

From the SOS Webcast Archive -

Getting Crafty with Crystal: Solving Stock Plan Reporting Issues with Crystal Reports

Our Services:


Equity Compensation Projects/Consulting

SOS-TEAM Outsourcing

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Check out the new SOS Website
Ideas or Questions:

Do you have ideas for our next newsletter or webcast? Topics you're dying to see addressed but haven't yet? Please send us an e-mail with your ideas to: xtra@sos-team.com.

Helping Hands

Over the last several weeks we have all seen the stories of the earthquake and tsunami in Japan. Even after seeing pictures of the devastation, most of us probably cannot imagine the impact this is having on local residents in Japan. As we have done before during large scale disasters, we struggle with feelings of helplessness? We may be forced to recognize that we are largely powerless to reach into the disaster and effect significant change, but we can channel this energy into something that can make a difference.

Every day, we manage and create benefit programs that help employees around the world succeed and realize their dreams. Feeling helpless breeds frustration and we can use this power to help us ensure their equity is available when they need it. When faced with these feelings, I use the following principle:

"Redirect the substantial energy of your frustration and turn it into positive, effective, unstoppable determination." -Ralph Marston

I am fortunate enough to work with many global companies and see firsthand how the equity benefits can put significant funds into deserving hands. I am always proud when we help our clients implement best practices for their equity department, but after helping tsunami-affected Japanese employees promptly receive equity-based payments, I have seen yet another way equity can help employees around the world.

These funds are helping people start their lives over, buy survival supplies, pay for medical treatment, things for which we never considered these awards to be for. I urge you to use the power of your feelings of frustration to make your programs better, more efficient, and to serve your employees the best you possibly can.

Lastly, please consider making a much needed donation to the tsunami relief. Here is the link to the American Red Cross Update and Donation website.

Barrett Scott, Principal,
on behalf of

The SOS Team

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Market Research Survey

Complete the survey and be entered into a drawing for a $100 gift card!

Periodically, SOS will ask for issuing companies' participation in a market research survey to enhance our understanding of current practices and trends in the industry and to provide our clients insight into the practices of other issuing firms. Our surveys are brief, taking no more than 5 to 12 minutes to complete. Complete the survey today!

Please note that only issuing companies, not vendors or consultants, should complete the survey and are eligible for the drawing. Thank you for your cooperation!

Consultant Corner

Confounding Conversions

Conversions, conversions, and more conversions. It seems wherever I go, whichever assignment I take, I end up with a stock plan conversion project landing squarely in my lap. Over the 20 years I've been in equity compensation/treasury work, I've probably handled ten different conversions. From spreadsheets to stock plan systems, from one vendor to another, assisting with IPOs, helping companies bring administration in-house from a law firm. Apparently conversions like me and will find me no matter how well I hide.

Sarcasm aside, having this much experience with conversions has its perks. I've worked out a system and a schedule that I populate from the start and chug through, step by step by step, documenting and creating an audit binder as I go. (That's one tip I'd recommend to everyone, don't put off documenting and creating your back up materials to the end of the process. Make sure to document each step of the process and archive the relevant materials as you go. It will save you much time and many headaches later on.)

Interestingly, one of the most common issues in conversions is the lack of quality participant data in the stock plan system (or spreadsheet). Since the stock plan system is not the system of record for employee data, many companies seem to put the bare minimum of information on a participant into the system, making the subsequent reconciliation a total nightmare. Some companies don't even bother with participant IDs which makes importing data impossible. That's often a first step in conversions, getting those employee IDs into the system so you can sync up with the supporting systems (HR and payroll). And though this is preaching to the choir for most of you at this point, please don't use social security numbers as your employee IDs. Yes, they are unique, and yes, most everyone (in the US) has one, but resist the temptation - in California and soon to come in many other places, the laws around mailing out anything with an SSN make their use as an ID painful at best.

Another seemingly obvious conversion tactic: tie out as you go. Get your participant info into the system and tie out. Get your grant info into the system and tie out. Get your exercise info into the system and tie out. Get your termination data in and tie out. Why not wait until the end and tie out just once? Because mistakes can then be anywhere. If you tie out as you go you've limited the arena of errors and made your job easier and faster.

Yes, conversions are a lot of work and can take anywhere from a couple of days to several months, but if you start with a detailed plan in place and remember that the point of the conversion is to get your data onto a "better" system that will make your life easier in the future, you can and will survive it. And maybe even learn a thing or two in the process.

Sandra Briggs, CEP
Stock & Option Solutions


Sandra Briggs is a Senior Equity Consultant for Stock & Option Solutions. She is a Certified Treasury Professional (CTP) and a Certified Equity Professional (CEP) with 15 years of experience who has managed equity programs for successful S-1 Filer IPO start-ups as well as international Fortune 500 firms.

Sandra has hands on experience in all aspects of equity compensation management, system development and process implementation. She has held senior level positions in accounting and financial reporting for equity programs throughout the course of her career.

Sandra also actively pursues education to stay current in global equity compensation, treasury issues and certifications through the NASPP, Association for Financial Professionals (AFP) and the San Francisco Treasury Management Association (SFTMA).

SOS Accounting Answers

Accounting for equity compensation has been the number one topic for articles in SOS Xtra. Because the response to these articles has been so great, we are giving this subject its own section, SOS Accounting Answers, each month. If specific equity accounting issues are keeping you up at night, email us...we'd love to cover it in a future issue of Xtra.

This month, we tackle:

Accounting for Non-employee RSUs

Recently a question was posted on an equity-compensation Yahoo Group of which I'm a member.

"My accountants are asking me...why aren't I marking-to-market my new non-employee RSUs, when I mark to market their options? Anyone have some paragraph number I can tell them to go and read, please?"

She had assumed that because the system she was using for administration and accounting didn't perform mark-to-market accruals for non-employee RSUs, it wasn't required.

I explained that non-employee RSUs should be marked to market. And just because many systems don't support this, doesn't mean it's not required.

But the good news is that accounting for non-employee RSUs is much easier than non-employee options! (I had recently created a custom Crystal report for a client for non-employee RSUs, so knew the required calculations already.)

Why are they easier? Well simply because options require that you recalculate a Black-Scholes fair value (or some other option-pricing model) at the end of each reporting period while RSUs simply use the market value, so are relatively easy to handle with a custom Crystal report or a quick Access query.

Remember that unlike employee options/RSUs, non-employee grants use the vest date as the measurement date and are revalued each reporting period until they vest.

A few pointers on the basics behind the calculations:

  • In general the FIN 28 (or "Multiple") approach is used for non-employee grants. This was explicitly required by EITF 96-18 which laid out the rules for accounting for non-employee grants in the pre-codification standards.
  • For the prior market value, use the market value in effect on the Report Begin Date minus 1 day. (The easiest way to do this is to have a "report parameter" for prior market value that you input when the report is run. This will be the same value for all the grants.)
  • For the current market value, use the market value in effect on the Report End Date. (Yet again, have a "report parameter" for current market value that you input when the report is run. This will be the same value for all the grants.)
  • For any vested tranches, determine WHEN they vested.
    • If they vested before the report period began, use the market value from the vest date for prior market value AND for the current market value. (No additional expense will be booked.)
    • If they vested during the report period, use the prior market value input at report run time for prior market value AND pull in the vest date market value for the current market value. (Expense will be trued up to final market value on vest date.)
    • If they vest after the report period ends, use the inputs for both prior and current market values, since the value hasn't yet been "finalized". (Expense will be trued up to the most recent market value, but will true up again next reporting period.)
  • To arrive at current period expense, always subtract prior expense (prior elapsed service period * prior market value * shares) from to date expense (to date elapsed service period * current market value * shares). This will automatically true up your expense in the current period, correcting up, or down, for fluctuations in the market price and for the continuing progress of the vest schedule.
  • Don't forget about estimated forfeiture rates. Be sure to "haircut" your accrual of expense by your estimated forfeiture rate. (Luckily you may find the forfeiture rate already in the report you use as a basis for your calculations - that's what we did - made life much easier.)

In summary, non-employee RSUs can be a bit of a hassle, but once you automate your calculations, they shouldn't cause you more than a few minutes of effort each quarter from here on out.

Questions? Comments? Please contact me at edodge@sos-team.com.

Elizabeth Dodge, CEP
Stock & Option Solutions


Elizabeth is the Vice President of Product Management for Stock & Option Solutions, Inc. (SOS). Her responsibilities include monitoring new developments in the equity compensation arena, performing market research, speaking at industry events and helping to define the product roadmap for SOS.

Elizabeth regularly speaks on industry trends and product development at client and industry events including NASPP and NCEO webcasts, GEO and NASPP Chapter meetings, and the NASPP Annual Conference. She was also selected to speak at the West Coast FASB Roundtable on FAS 123(R) and co-authors the chapter on accounting for equity compensation in The Stock Options Book, by Alisa Baker. She became a Certified Equity Professional in 1999 and continues to volunteer for the Certified Equity Professional Institute as well as serving on the CEPI Curriculum Committee. She is also the president of the Silicon Valley Chapter of the NASPP and serves on the Board of Directors of the NCEO.

Free SOS Educational Webcast

Insider Edition: Best Practices and Emerging Issues

April 19th, 2011

Click here to register.

Please join us for our next educational webcast on April 19th at 11am Pacific Time, 2pm Eastern Time.


Insider processes and filings for stock plans are simultaneously difficult to manage and highly visible to both the world outside your hallowed halls and to the most important people within your company. Getting them right is paramount.

But with the day-to-day pressures of your job, the tight timeframes for SEC filing, the constantly changing regulatory landscape, and the sometime-less-than-available nature of the insiders themselves how do you manage to herd these cats and stay ahead of the game?

Join our panel of experts for a frank discussion of some of the challenges inherent in your insider processes and ways to tackle them while keeping the burning of midnight oil to a minimum. This webcast will review some recent changes and trends in insider processes and filings and will also provide best practices for streamlining this demanding area.


(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

SOS Spotlight

  • On March 18th, SOS completed its 200th 6039 IRS e-filing on behalf of our clients (with more to go). We are very proud of all the hard work our dedicated team of consultants put into ensuring our clients achieved compliance with these newly revised regulations.
  • Elizabeth Dodge was recently invited to participate as a speaker for the NASPP's new online course, "Financial Reporting for Equity Compensation". Elizabeth's session will focus on Earnings Per Share, concentrating exclusively on basic and diluted earnings per share under ASC 260 (formerly FAS 128), including a comprehensive discussion of how fully diluted shares outstanding are calculated using the treasury stock method. More information, as well as a registration link can be found in the SOS Xposé section of this newsletter.
In case you missed them, here are links to the February Issue of SOS Xtra and our March educational webcast:

February 2011 Xtra Newsletter

And don't forget, you can always access our complete archives, with links to every article, from our SOS Xtra Newsletter web page.

The Taxman Cometh: Commonly Asked Participant Tax Questions &How to Answer Them

SOS Product Spotlight: People Solutions Interim Staffing

Juanita Medina at Brocade in San Jose, CA

Whether your department is short a stock administrator because of a vacation, medical leave, or departmental vacancy, SOS can provide a resource at every level and can cover the full range of responsibilities within your equity compensation department, including overall stock plan management, senior administration tasks, and day-to-day processing.

Read on to see how we have helped a real clients handle their resource challenges...

Back in September of 2004, Juanita Medina was assigned to a six week interim project at Foundry Networks while they recruited to fill the role left open after their stock administrator moved out of state. Nearly seven years and an acquisition later, Juanita is still going strong as the go-to person in the equity compensation department now housed at Brocade. Now Juanita finds herself working with a totally different group of people than when she first started. Since the acquisition, Juanita has experienced many changes to her role. With more employees in more countries, Brocade has presented her with greater challenges and a new job description than she had with Foundry. While her role at Foundry revolved around day-to-day activities, she now focuses on special projects, such as assisting the department manager with her projects, monthly and quarterly reporting and audits, and managing the company ESPP plan.

Over the course of her lengthy engagement, Juanita launched Foundry's ESPP online enrollment with E*TRADE Corporate Services, worked on Foundry's restatement/409A project, supported the acquisition of Foundry by Brocade, and assisted with the implementation of Brocade's new ESPP plan. Juanita was able to leverage her consulting experience to support the ESPP implementation and acquisition. However, the ESPP online and restatement/409A projects were new terrain for Juanita and she turned to the knowledge base and resources of the SOS Team to ensure they were a success.

Jeanine Rojko, CEP, Manager of Stock Operations at Brocade told us that "Juanita has been a great addition to the Brocade stock administration team. She is a perfect fit, bringing a wide range of knowledge as well as technical skills that have been instrumental in improving efficiencies in the department. Best of all, I am able to go on vacation worry free knowing that anything coming her way will be handled!"

When asked what she is most proud of out of her many accomplishments on this assignment over the years, Juanita points to the SOS team, which she relies on for the support, and guidance when she is asked to tackle a project that is new to her. She can confidently handle anything that comes her way because she knows she can count on SOS to assist her clients and get the job done right. Though she has a strong connection to SOS, she also feels like a part of the Brocade family. Brocade includes her in company events, and she has even assisted them with party planning and setting up for potlucks in her spare time. Of her experience as both an SOS employee and Brocade consultant, Juanita had this to say: "I am so fortunate to have worked for the same client for such a long time. The people at Brocade make me feel like a fellow 'Brocadian' and I still feel part of the SOS family. I have the best of both worlds!"

For more information, please feel free to contact us at xtra@sos-team.com

NCEO Volunteer Opportunity for CEPs

The NCEO is looking for Certified Equity Professionals (CEPs) who are willing to write 10 practice questions for the NCEO's Prep Course for the CEP Exams. In exchange, you'll get a free set of the 2011 editions of the CEP text books published by the NCEO. That's The Stock Options Book, 12th ed.; Selected Issues in Equity Compensation, 8th ed.; Beyond Stock Options, 9th ed.; Accounting for Equity Compensation, 8th ed.; and Advanced Topics in Equity Compensation Accounting, 2nd ed., just for writing 10 questions in your area of expertise. We'll also include your name in the acknowledgments section of the course.

If you are interested in helping out, just e-mail Pam Chernoff. Include your primary area of expertise: accounting, taxation, administration and plan design, or securities law, and she will send you the books and specific assignments.

Elizabeth Dodge said, "This is a fantastic way to get current reference materials without any budget. The books started out great but get better every year and are updated with fresh material as things change. These books are one of my top 'go to' sources for all thing equity comp!"

Slight disclaimer: Because it is for a training program, this activity does not qualify for CEP continuing education credit.

SOS Across Our Desk: Equity Compensation in the News...

Dodd-Frank and Incentive-based Compensation
FDIC and related Agencies propose rules under Dodd-Frank Reform Act relating to incentive-based compensation arrangements...6039 decisions have been made.

Another excellent NASPP blog - this one about incorrect information on ESPP taxation on the Intuit website, of all places!...NCEO Employee Ownership Update - ESPP Participation is on the rise!

Get your custom reports here!
From The NASPP Blog - "Plays Well With Others" - an excellent plug for custom reports from SOS, even if it doesn't mention us by name.

Most CFOs are unprepared for IFRS convergence, survey says. US's influence will wane without IFRS, warns European Commission.

Private Company Accounting
FASB parent creates working group on private company reporting.

Executive Compensation
Negotiating terms within executive employment agreements.

Ex-Monster CEO Treacy's 2009 conviction for backdating is upheld on appeal.

Equity Comp Philosophy
What Do You Do if You Don't Like Your (Stock) Options

Want to get these updates as we find them? Follow us on Twitter or become a fan on Facebook.

SOS Xposé

...tender tidbits about people and players in our industry...

On the move...Former SOSer Michelle Shea is the new Sr. Stock Plan Administrator at Qualcomm...Susan Berry has joined Blue Coat Systems as Director, Stock Administration...Brandon Cherry, Brooke Green and Kyle Holm have joined Hay Group's San Francisco office as Principal Consultants...Linda Hart joined Skype as Manager of Stock Administration...Good luck, and congratulations to everyone!

New Arrivals...SOS Consultant Tim McCleskey and his wife Sallee had a baby boy, Leo Nash, on March 3rd. Leo is their third child, joining older siblings Isabella and Hudson. Lots of pictures here, here, and here (with Hudson). Congratulations, Tim and Sallee!

Change in scenery...Pam Chernoff of the NCEO is keeping her Irvine, CA zip code, but has moved to a new house. She plans to stay for a long, long time.

Industry News...Charles Schwab launches Equity Award Consultation Team for Corporate Stock Plan Clients...Solium Transcentive is excited to announce the release of version 13, which includes taxation on mobile participants and the ability to accelerate shares for taxes due for participants that hit their retirement eligibility date...StockCross Financial is proud to be a corporate sponsor of the GEO Conference in Amsterdam and a founding sponsor of the NECF (National Equity Compensation Forum) in Scottsdale this year.

Gray Matter...The NASPP is offering a new online course, "Financial Reporting for Equity Compensation"--early bird discounts on registration are available until April 29 and the course begins on July 14. Follow this link for more information.

We'd love to hear from you for our next newsletter. If you or someone you know is taking a new job, expecting a child, getting married, releasing a new product, or has just done something that might be interesting to the good readers of this publication, please drop us a line: xtra@sos-team.com

Enjoy The Masters!

Did you miss an issue of Xtra? View our complete newsletter archive from our new website here
Miss a webcast? You can find links to recordings, as well as the materials, on our Webcast page

Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisors. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.
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