Startups managing their ESOPs on EquityList can now directly download ESOP Expense Reports following the graded-vesting method.
When a startup offers ESOPs to their employees as part of a compensation plan for services to the company, a cost to the company is incurred (not in cash but in kind). Therefore ESOPs are considered an expense to the company that needs to be recorded in the company’s accounting books.
Startups registered in India should comply with Indian Accounting Standard 102 (IndAS 102) to report ESOP expenses as recommended by the Institute of Chartered Accountants of India (ICAI). IndAS 102 establishes uniform accounting principles and practices for all types of share-based payments toward employees and non-employees for Indian companies. As options/shares are usually granted to employees across a graded vesting schedule, this report needs to account for the cost incurred by the company for each vesting group.
💡Graded vesting is when employees gradually gain ownership of employer contributions in their stock options. It is a type of vesting schedule that slowly increases over the course of a few years.
Suppose an employee is granted 1,000 options where 250 options vest per year across 4 years. In this case, each tranche of 250 options will be evaluated and accounted for separately. This report also needs to factor in accelerated vesting cases, employee terminations, and options forfeiture, amongst others.
Finance teams end up spending hours collating grant-wise data split across multiple vesting schedules on a quarterly basis. This perpetually recurring activity is highly cumbersome and error-prone when done manually over spreadsheets.
Startups managing ESOPs on EquityList can now easily download month-wise expense reports directly from their dashboard, saving countless hours. These ESOP Expense Reports follow the graded-vesting method and thus make the process much more efficient, leaving no account for errors.
Companies like Slice use these reports for their quarterly filings and save them a bunch of time in reconciling ESOP-related costs for hundreds of grants. Hear it yourself from the slice team -
Startups registered across India, Singapore and the US can administer and manage their ESOP grants on EquityList. Reach out to us at help@equitylist.co to start your ESOP and cap table management journey.
Disclaimer: Information provided here is for informational and discussion purposes only and is not intended to be a recommendation for any legal, tax, or financial advice of any kind.
