Stock-based compensation is when employees are awarded stock or stock options as a form of compensation other than cash compensation. Startup companies typically use stock compensation because they lack the cash to pay employees competitive rates, but companies must abide by strict laws and compliance considerations when offering stock options to their employees.

The Purpose

Valuation of equity-based employee compensation is necessary for the context of financial reporting. Under ASC 718, a company that awards its employees stock-based compensation must recognize the fair value of those awards in its financial reporting. The cost of the stock-based compensation is recognized over the period the employee provides a service or the vesting period. Independent third-party valuation experts can perform valuations and provide support for the amount to be expensed.

Trigger Events

  • New hires
  • Merger
  • Acquisition
  • Key role turnover

Scalar’s Services

Scalar’s specialization in business valuation ensures clients are getting the most accurate valuations delivered with the highest level of customer service. Scalar’s expert valuation consultants act as expert partners to ensure clients are in compliance with IRS regulations and offering the most accurate stock value for their employees.