How Value8 Handles ASC 718 / IFRS 2 Expensing

The product model: self-service software, not a done-for-you service

Value8's ASC 718 / IFRS 2 stock-based-compensation module is a feature of Ledger, the accounting, tax, and compliance layer that sits on top of a Value8 cap table. It is software the customer runs, not an engagement Value8's staff perform on the customer's behalf: a company's own finance team opens the module, reviews per-grant expense schedules, and runs the quarterly period close themselves. The two are different offerings: the 409A valuation is a done-for-you appraisal Value8's appraisers deliver, and the ASC 718 module is self-service software the customer runs.

Because the module runs on top of a cap table the company already maintains in Value8, shares, option grants, vesting schedules, and financing history flow directly into the expense calculation. There's no separate system to populate and no re-keying of grant data into a parallel spreadsheet.

Where it lives in the product

Inside Ledger, Stock-Based Comp → Command Center shows cumulative recognized expense and the deferred tax asset balance across all grants, with a GAAP/IFRS toggle in the top bar that flips the entire module between frameworks. Stock-Based Comp → Grants shows per-grant expense with a schedule deep-dive per award. Stock-Based Comp → Period Close runs the quarterly close. Stock-Based Comp → Audit & Disclosure holds the tax/DTA workpapers, the GAAP and IFRS footnote disclosures, and the chronological event log an auditor reviews.

The calculation engine

Fair value measurement

The engine dispatches by award type. Option-like awards (ISOs, NQSOs, cash- and stock-settled SARs, and option-structured awards under other equity regimes the platform supports) are priced with a Black-Scholes closed-form model. Full-value awards (RSAs, RSUs, and plain stock grants) are valued at grant-date fair market value less any amount paid, per ASC 718-10-30-2 / 718-10-30-6, with no option-pricing step since there's no option. Expected term for standard options defaults to the SEC's SAB Topic 14 simplified method (the midpoint of the vesting and contractual terms). Awards carrying a market condition (a stock-price or total-shareholder-return vesting trigger) are routed to a separate lattice/Monte Carlo valuation path instead of closed-form Black-Scholes, because a market condition's path-dependent payoff can't be priced in closed form.

For a private company, the Black-Scholes stock-price input is the common-stock fair market value from the company's current 409A valuation, already on file in the same system; there is no second data-entry step to carry that figure into the expense calculation.

Attribution

Expense is attributed over the requisite service period using either straight-line or graded (FIN 28) amortization, as a company-level or grant-level policy choice. Both methods read the grant's actual vesting-schedule tranches, rather than assuming a uniform interval, so a 1-year-cliff-plus-monthly schedule amortizes against its real tranche dates. The straight-line method enforces the ASC 718-10-35-8 vested floor: cumulative recognized expense at each period end is floored at the grant-date fair value of whatever has actually vested by that date, with an automatic catch-up entry in the period a front-loaded tranche vests, rather than letting a pure daily-rate calculation under-recognize against the standard's explicit floor.

Forfeitures

The engine implements all distinct forfeiture-event outcomes the standards define, with GAAP and IFRS logic evaluated independently per framework rather than one treatment approximating both: pro-rata reversal for a service-condition failure, full reversal to zero for a performance failure, 0 to 200% scaling for partial performance achievement, no reversal for a market- condition failure (the outcome is already priced into grant-date fair value), framework-specific treatment of a non-vesting condition failed by the holder's own choice (ordinary service treatment under GAAP, immediate acceleration under IFRS 2 ¶28A), and acceleration for an entity-initiated cancellation under both frameworks. Each computed event carries a plain-English explanation and the specific standard citation it applied, so the number on the books and the rule that produced it are both visible in the same place.

Modifications

Modifications (vesting acceleration, repricing, term extensions, performance-target changes, and similar) are classified against the GAAP Type I through IV framework and the IFRS 2 beneficial-modification test, and the engine computes the incremental fair value and any required cumulative catch-up from the pre- and post-modification grant-date fair values. A genuine change in the probability of a performance condition being met, as distinct from an actual change to an award's terms, is routed through the forfeiture/true-up path instead of being misclassified as a modification, which is one of the more common manual-process errors the engine is specifically built to avoid.

Tax

Alongside the book expense, the engine tracks the related deferred tax asset and its movement, and the tax effect realized on settlement (exercise, release, or expiration), including the ISO-specific rule that switches off the deferred tax asset for ISO-family awards that don't generate a book-to-tax difference. These tax figures feed the same disclosure set described below rather than requiring a separate tax calculation.

Period close

Running the close is a guided, per-quarter wizard (Owner and Admin roles only; other roles can review but not post):

1. Pre-flight: pick the period and confirm the underlying grant data is current.
2. Forfeiture true-up: confirm the period's forfeiture events.
3. Settlement P&L routing: confirm how the framework's settlement activity routes to the income statement.
4. ISO $100k check: confirm the ISO annual-limitation posture for the period.
5. Sign-off: a typed confirmation phrase, then posting.

Posting writes the period's journal entry and locks the period: the entry becomes immutable. A later correction is filed as a restatement rather than an edit to the posted entry, which keeps the audit trail defensible instead of allowing a closed period to be quietly rewritten.

Disclosures and audit evidence

The Audit & Disclosure workspace generates the footnote disclosures both frameworks require directly from posted grant and period-close data: for GAAP, an options activity rollforward (with weighted-average exercise price and remaining contractual term), weighted-average grant-date fair value of awards granted, intrinsic value (exercised, outstanding, exercisable), valuation assumptions by grant year, total compensation cost (including any liability-classified portion), the tax effect and realized tax benefit, cash received from exercises and cash used to settle equity, and unrecognized compensation cost with its remaining weighted-average period; for IFRS 2, the equivalent rollforward and assumption tables plus the equity-settled/cash-settled expense split (¶45(d)) and total equity-settled expense (¶51) for companies with any liability- classified or cash-settled awards (e.g., cash-settled SARs).

A disclosure-completeness check runs before any audit-export package is generated, comparing the rendered footnote against the framework's required-item list and blocking export if a required item is missing, rather than letting an incomplete footnote leave the building silently. The chronological event log (every expense, forfeiture, modification, and close event, each tied to the standard citation it applied) is what an auditor reviews alongside the numbers.

What this page does not claim

• Value8's ASC 718 / IFRS 2 module is software a customer operates; Value8 staff do not perform the expensing calculation on a customer's behalf. This is the opposite framing from Value8's 409A valuation service, which is appraiser-delivered.
• No claim is made here about pricing; see pricing.
• No claim is made about guaranteed audit acceptance of any given company's figures; the engine computes figures correctly from the inputs provided, it does not substitute for an auditor's own judgment on a specific engagement.