Stock-based Comp: Adjust FMV for Expense

Question

We need to determine how to book stock-based compensation using a value that essentially bridges from one 409A to the next. The gap in 409A values from April 2021 to August 2021 is a steep increase, which should be factored into the amount of stock-based compensation that we book; however, we do not wish to impact other reporting for tax or otherwise.

We recently migrated to the new "financial reporting" tool for booking expenses and I have not used it yet. I see options to set and select multiple scenarios - perhaps we can use this. I see that we also can add in FMVs in this tool, which appears not to be tied directly to the 409A module of Carta - perhaps we can use this. Is it possible to use these/adjust FMV WITHOUT having an impact on the 409A? Thanks!

Answer

Both methods that you suggested would work for adding in news FMVs without having an impact on the 409A. The first method you suggested - creating a new scenario - would allow you to add in custom FMVs (and other methodology settings) in a new environment without having any effect on historical reports that have been saved in other environments; to make this process quicker, I can clone the settings from your current environment if you would like, or you are free to create a new scenario and manually add in the settings yourself.

Alternatively, you can also upload custom FMVs on an award-level basis by utilizing the custom assumptions importer. The process for doing this is described in this support walk-through article: https://support.carta.com/s/article/custom-assumptions-v. (Please note that if you use this method, you should also leave the fair value cells blank for any awards with updated FMVs if you would like the fair value to be recalculated.)

Please let me know if this helps clear things up - or if you have any other questions about these processes!

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