The sheer number of employees receiving diverse compensation plans presents challenges for corporations and institutions. By their very nature, employee equity plans can be complex, and organisations must handle large volumes of data and turn it into relevant and timely reports.
Equatex’s Lisa Sennhauser recently moved into a newly created role to lead a sales programme for the company’s financial reporting and accounting solution EquatePyramid. Lisa, who previously had a number of senior finance roles, most recently as CFO of Equatex, and who earlier was also responsible for compensation controlling at UBS, discusses the challenges of global mobility, restructuring activities and regulation in the accounting of employee share plans, and why EquatePyramid is a one-stop shop for all reporting.
The rules surrounding the accounting of equity based compensation are very complex and there is an inherent risk in the reporting and disclosure, particularly in light of changing accounting and regulatory requirements. For multinationals to fully appreciate the true value of the compensation packages they offer and for the plans to be a success, employers need to have timely access to transparent and relevant reporting.
A challenge for many large institutions is global mobility. The trend toward short-term international assignments means tracking is essential, with employees being in one country for their individual tax purposes; another for legal entity payroll reporting; and in another for business unit performance purposes. Companies must ensure that the accounting of employees’ compensation plans is consistently applied across the globe and captures their mobility to avoid falling foul of regulation, or simply not understanding the true location or business costs.
Restructuring activities in a global business also have a financial impact on every aspect of an organisation, including employee compensation. If a company is planning on selling off a division, or relocating certain teams to an offshore entity, it needs to understand the financial impact that this change in location has on the compensation accounting and reporting. Likewise, mergers and acquisitions can impact the financials of employees in terms of tax and earnings. EquatePyramid can create a ‘sandbox’ using data from the live environment and calculate the impact of various restructuring alternatives on the whole organisation.
With EquatePyramid our clients have access to a comprehensive, accurate and real-time accounting and financial reporting tool for their deferred compensation plans. Powered by industry experts such as Lisa, we take the pain out of financial reporting and empower our clients with a higher level of confidence and flexibility in their reporting”
– Finn Dahl, Head of Equatex Nordic
More than a financial reporting tool
While most large institutions have proprietary tools to do their accounting for equity-based compensation, there is still a lot of resources employed, and significant use of spreadsheets and manual reconciliation. Outsourcing this to an external provider, and thus having your financial staff across the organisation accessing their financial reports from a central platform, like EquatePyramid, is cheaper, more efficient and less risky, and it offers a full audit trail that is easy to understand and transparent.
The platform takes the data from institutions’ employee share plans and transforms it into accounting data transmitted through easily accessible reports across legal entities or business management units. For example, regions or tax and treasury departments can access their own reports regarding personnel costs, related tax deferrals as well as the share plans’ impact on diluted earnings per share. The platform can receive transactional data from any plan administration system – in-house or external.
Accounting is complex and a good platform also requires an experienced team of experts, which is something that we have developed over 14 years. Equatex has more than 25 financial experts employed in our financial reporting competence centre in Olso, Norway, purely for their in-depth expertise of international accounting and disclosure requirements for deferred compensation. With the aid of their knowledge, the platform is equipped to handle the main global accounting standards, IFRS and US GAAP, and can be adopted for local GAAPs.
The tool and our highly qualified people who keep it up to date with requirements help companies and organisations get more value from their accounting data, enabling them to make better management decisions for their employees.