Forecasting & Budgeting

Finance is expected to deliver accurate and descriptive forward-looking estimates of compensation expense and shares used for basic/diluted EPS. Expectations are trending toward higher granularity and lower tolerance levels for unexplainable variances. But stock-based compensation, with all its moving parts, is a tough item to forecast.

Services

We provide customized forecasting across all reporting categories of interest: expense, diluted EPS, basic EPS, tax windfalls and shortfalls, and new award designs being considered. Key components of our forecasting, budgeting, and variance analysis solutions include the following:

Compensation expense tracking

  • Against annual budget or operating plan (AOP)
  • By detailed indicative data categories each month or quarter
  • By current latest estimate (LE)

Future period compensation expense forecasting

  • Multiple forecasts of varying time horizons and levels of granularity (e.g., cost center level, P&L segment level, etc.)
  • Automated budget-to-actual variance analyses that identify and quantify the key drivers (e.g., more forfeitures than planned)
  • Special circumstances, including retirement eligibility, post-vest holding period restrictions, and impact of expected tax deductions
  • Estimates of hypothetical future grants using various approaches to more accurately mimic expected future granting behavior
  • Fully customized scenario analytics to incorporate uncertainty, including performance and market outcomes, tax rate changes, and modifications

Forecast to actual comparisons

  • Automation of budget-to-actual variance analysis process to identify and quantify key variance drivers (e.g., more forfeitures than planned)
  • Automation of flux analysis to inform stakeholders of expense trending and identify unusual expense movements
  • Summary and detailed analytics to meet needs of varying stakeholders within your organization

Custom analysis needs

  • Impact of adding new retirement provisions
  • P&L implications of new grant types (e.g., performance/market, liability awards, etc.)
  • Modifications (e.g., terminations, resetting performance targets, etc.)

Basic and diluted shares forecasting

  • Modeling of settlement timing and price on outstanding awards, as well as flow-through impact to Basic Shares and Dilutive Shares (per treasury stock method)
  • Scenario analysis to capture timing and settlement price uncertainty
  • Flexible formats to enhance usability of forecast reports

Tax settlement forecasting

  • Settlement timing and price on outstanding awards to produce a waterfall of expected tax windfalls and shortfalls
  • Scenario analysis to capture timing and settlement price uncertainty
  • Reconcile expense and tax settlement forecasts to assist with Schedule M-1 production
  • Read more about tax settlement forecasting here

Get better insight and avoid accounting surprises while staying firmly in control of your forecasting and budgeting process.

Contact Us About Forecasting & Budgeting Services