Community blogs

Non-Employee Award Valuation (ASC 505-50 & ASU 2018-07)

By Calvin Cheng posted 11-25-2024
Historically under ASC 505-50, non-employee awards were valued on the date the equity award was earned (the vest date) while employee awards were valued on the date the equity award was granted (the grant date). Using mark-to-market accounting, the hope was to more accurately measure non-employee awards as the underlying value of the company’s stock fluctuates over time. This was later amended with ASU 2018-07 which have both non-employee and employee awards valued a single time on the grant date. The latest a company could adopt ASU 2018-07 was the company’s fiscal year after December 2019. Let’s look at an example where the same award of 1,000 ...

Graded Straight Line Amortization

By Calvin Cheng posted 11-24-2024
The straight line amortization method is the idea of expensing an equity award of each vesting tranche sequentially where the first vesting tranche is fully expensed before the subsequent vesting tranche begins to expense. For awards with multiple vesting tranches, Carta’s SBC expense reports will treat each vesting tranche as its own award with its own service period (ASC 718-10-35-8a) to ensure the minimum amount of expense recognized is at least the fair value of what has vested. Service Periods Each vesting tranche is assigned its own service period. The service period cannot begin until the award is authorized ...

How SBC Expense Is Calculated

By Calvin Cheng posted 11-23-2024
Carta’s SBC Expense Report will provide a journal entry for the period expense of the reporting period. To understand how that amount is determined, companies need to know how the cumulative amount of expense is determined. Afterwards, the current period expense is simply an adjustment between the cumulative expense in the current reporting period and the cumulative expense in the prior reporting period. Each reporting period will first determine the cumulative amount of expense that should be recognized by considering all the latest updates to the cap table including: New grants Terminations ...

Expensing Expired Stock Options

By Calvin Cheng posted 11-23-2024
A common question companies ask is whether they should reverse stock compensation expense on vested stock options that expire unexercised after the employee terminates service. The expense is actually related to the value of the stock option itself in exchange for the employee’s services, not for the actual delivery of common stock. Therefore, if the employee has earned/vested the stock option, the employee has received the promised value by being able to exercise and the company should recognize stock compensation expense for the services received from the employee. Previously recognized compensation cost shall not be reversed if an employee share ...

Volatility Inputs for 409a Valuations and ASC718

By Calvin Cheng posted 11-22-2024
Background A frequent question we get from companies is: Why is the valuation of stock options in Carta’s stock compensation expense reports using a volatility value that is different from the volatility value used in a 409a valuation report? Simply put, the two reports measure volatility over a different period of time and under a different methodology. Key Points The volatility assumption in the 409a valuation should not be used to value options under ASC718 A measurement of volatility over a different period of time will result in a different volatility The 409a valuation may use a percentile ...

Different Volatility and Interest Rates

By Calvin Cheng posted 09-25-2024
Why are different volatility and interest rate values being used to value stock options granted on the same date? Volatility represents the change in the value of stock over a specific period of time. The interest rate represents the risk-free interest that can be earned over a specific period of time. The specific period of time used in the Black Scholes option-pricing model is the expected term of an award. Carta calculates the expected term on the grant date using the SAB107 method, which is an average of the stock option’s vesting term and the contractual term: In many cases, the vesting ...

Quarterly Benchmark Refresh and Updated US and International Geographic Adjustments - Q2 2024

By Brent Devey posted 05-03-2024
What’s new? We have updated salary, total cash compensation, and equity benchmarks for all job areas and specializations. Additionally, we have updated US geographic adjustments for all metro areas as well as international market adjustments and currency conversions. Benchmark Trends In aggregate, salary and total cash compensation benchmarks are slightly higher than our last release, increasing by 1%. Salaries increased slightly more for companies with valuations up to $100M. Across all roles, levels 7 and above tended to increase more than levels 6 and below. Similar to previous updates, specialization level data continues to change more than the broader ...

What you need to know to prepare for onboarding

By Joseph Thompson posted 03-13-2024
Here’s everything you need to know about preparing for the smoothest onboarding process with Carta. In this blog post we’ll share some tips and tricks to help you make your onboarding a breeze. Getting started Firstly, you need to start with a current cap table, a state stamped article of incorporation … and a knowledgeable Implementation Manager from Carta to help you on this equity journey. Sure, all of this can seem new and daunting, but don’t worry, we’re here to guide you through every step of the process. Below, you will find EXACTLY what we need within a cap table: Cap table (common and preferred share classes) ...

Non-US Company Onboarding

By Pilar Picone posted 02-27-2024
Although Carta supports International Companies, there are a few differences that might affect the onboarding process and general requirements. Most important being that Carta will NOT be a Transfer Agent*, meaning that certificates created for International Companies won't have legal value. ​​Carta will generate a visual representation of the shareholder’s certificates for both the company and its shareholders. However, Carta does not replace your local transfer agent or share register’s certificates. *Since Carta is not a registered transfer agent outside of the United States, this means that while we can track your equity, you cannot issue securities ...

Introducing the Carta Compensation Community: Where HR Thrives Together!

By Brent Devey posted 02-06-2024
We are delighted to introduce the Carta Compensation Community—a dedicated space tailored exclusively for HR and finance professionals passionate about compensation, benchmarking, and equity awards. Join us as we unveil the myriad of benefits and opportunities available within this dynamic community! Here are a few: A Hub of knowledge for professionals Immerse yourself in a wealth of expertise! The Carta Compensation Community serves as your centralized resource for seeking advice from seasoned professionals, sharing insights, and staying abreast of the latest trends in compensation management. Networking with a personal touch Join a community ...

The power of participation: Carta Community's Engage & Earn program

By Brent Devey posted 01-16-2024
In the world of online communities, participation and engagement are key to fostering a thriving ecosystem. Here in Carta Community we understand the significance of our members' contributions and have introduced the Engage & Earn program to recognize and reward your dedication. This program not only encourages community members to share their insights and experiences but also adds a gamified element through badges and tiered rankings. Engagement points and tiers: At the heart of Carta Community's Engage & Earn program are engagement points, which serve as a measure of a user's involvement. Members accumulate these points by actively ...

Rising salaries in 2023 help raise the appeal of some smaller startup hubs

By Brent Devey posted 12-06-2023
The map of venture capital funding in the U.S. is growing more diverse every year. You can of course still find robust startup ecosystems in major coastal hubs like the Bay Area, New York, Boston, and Seattle. But in 2023, you can also find them in places like Nashville, Houston, Pittsburgh, and Indianapolis. The geographic diversification of the venture economy is a welcome development for startups in emerging ecosystems. Yet operating in a smaller market still poses certain challenges. One of these is battling the big-city competition for talent: Startups in established coastal hubs are historically much closer to dense populations of tech ...

Notifying Shareholders

By Brent Devey posted 09-12-2023
Congratulations! You've successfully navigated the cap table verification process, ensuring accuracy and transparency in your equity records. But the journey doesn't end here—welcome to the phase where ownership acknowledgment takes center stage. In this blog post, we'll guide you through the pivotal steps that follow cap table verification, ensuring that your securities are acknowledged and accepted by shareholders with ease. Account Activation: Setting the Stage Once your cap table details are verified and ownership agreements are confirmed, your Implementation Manager takes the reins to activate your account. This pivotal step marks the ...

Stock Compensation Expense & Forfeitures

By Calvin Cheng posted 09-04-2023
When a stakeholder terminates service, vesting will cease and Carta’s SBC expense reports will stop recognizing any expense for vesting that occurs after the termination date. Any expense recognized for what has legally vested as of the termination date does not reverse because the stakeholder has legally earned the option/shares. Any previously recognized/accrued expense for what did not vest due to a termination will be reversed. Key terminology: Forfeited - Shares/options that are unvested at the time of a termination or cancellation. Expired - Options that vested but were not exercised within the post termination exercise period ...

Company Details for Carta Onboarding

By Brent Devey posted 08-31-2023
Welcome to the world of Carta! We're excited to help you seamlessly navigate the onboarding process. To kick start this journey, let's delve into a critical aspect: the essential company documents you need to ensure a smooth onboarding experience. In this blog post, we'll break down each required document, explaining their significance and why they're fundamental to your Carta journey. A Fully Updated Cap Table/Ledger: The Blueprint of Ownership Imagine the cap table as a blueprint outlining the ownership structure of your company. It's like a financial map that shows who holds how much equity. When providing this document, ensure it's fully ...

Onboarding with Carta: A Quick Overview

By Brent Devey posted 08-31-2023
Welcome aboard to Carta's seamless cap table onboarding process! We're thrilled to guide you through the steps that will transform the way you manage equity. In this high-level overview, we'll introduce you to the key tracks that pave the path to a well-organized cap table and streamlined equity management. Setting the Stage To kick off your journey, expect to receive an email from your Customer Success Manager connecting you to your dedicated Implementations Manager. Next, your Implementations Manager will send an email outlining the necessary documents you’ll need to provide during onboarding and guide you on scheduling a kickoff call. ...

The Power of Carta Community in Elevating Your Professional Role

By Brent Devey posted 08-28-2023
The Power of Carta Community in Elevating Your Professional Role Welcome to the dynamic world of Carta Community—an ecosystem designed to empower you in your professional journey. In this blog post, we'll dive into the benefits that Carta Community brings to the table and how it can amplify your effectiveness in your role. From shared knowledge to networking opportunities, Carta Community is your gateway to professional excellence. Connecting Beyond Boundaries One of the most remarkable features of Carta Community is its ability to connect you with a diverse community of peers, experts, and professionals from various industries. Whether you're navigating ...

What's the difference between FMV and FRV?

By Shevaun Cash posted 08-17-2023
What’s the difference between Fair Market Value (FMV) and Financial Reporting Value (FRV) ? If you use Financial Reporting, then you’ve probably noticed a change: FMVs are no longer called FMVs in your 718 dashboard. In fact, there is no FMV in the dashboard; now, there is FRV. What does that mean, anyway, and why did this happen? Though the terms “fair market value” and “financial reporting value” are related, they have distinct meanings in different contexts : Financial Reporting Value (FRV): The value of common stock for Financial Reporting purposes within Carta, and the output of the ASC 718 Memo. This FRV will ...

ASC 718 - Grant Date

By Calvin Cheng posted 08-15-2023
An equity award's fair value is measured on the award's grant date. The grant date is typically the start of the service period in which the company begins recognizing stock compensation expenses. Accounting principles that determine the grant date: The grants are authorized by the board of directors The recipient has begun performing services required to earn the grant The company and the recipient has agreed upon the terms and the conditions The company is legally obligated to issue shares/options when vesting conditions are met The recipient begins to benefit from, or be adversely affected ...

ISO / NSO Stock Compensation Expense

By Calvin Cheng posted 07-02-2023
In most cases, the expense a company recognizes for stock compensation differs from the tax deduction they are entitled to, in both timing and amount. For example, expense of the fair value for non-qualified stock options is recognized over the service period but the company does not qualify for a tax deduction of the spread or intrinsic value until the option is exercised. Companies that wish to record a deferred tax asset (DTA) may want to know how much expense has been recognized for certain award types. The ‘tranches’ tab within Carta’s SBC Expense Report lists the ISO and NSO quantity for each vesting increment of each award. ...