Stock-Based Compensation — ASC 718

42 grants (RSUs and options, 4-year vest, 1-year cliff), 2022–2025. Every month-end, cumulative expense is recomputed from scratch out of tranche states — vested, active, forfeited — and the incremental engine must match it to the cent under both attribution methods. Synthetic, seeded data.

$0.62M

FY2025 expense — straight-line (policy)

$0.39M

FY2025 under graded (FIN 28) — same awards, same total, different timing

$0.6M

Unrecognized compensation remaining on active awards

$41K

Incremental FV from the March-25 repricing

$86K

Aug-25 expense dip — RIF forfeitures reversed at actuals

96/96

Month-ends where engine == closed-form recomputation

Monthly expense — straight-line (solid) vs graded (dashed)

Same ledger, two attribution methods. Graded treats every vesting tranche as its own award and front-loads: in 2024 it books $0.58M against straight-line's $0.61M. Both must converge to grant-date fair value at full vesting — check 2 proves they do, award by award. The August 2025 dip is the RIF: forfeitures at actuals (ASU 2016-09 election), reversed in the month they happen, not smoothed by an estimate.

The repricing

Grant #0 — 60,000 options struck at $8.40 in March 2022 — went underwater in the June 2023 down round and stayed there. Repriced March 2025 to $5.45. ASC 718's rule is unforgiving in a specific way: the original $298K grant-date fair value is never reversed — an underwater option still cost what it cost — and the modification adds incremental fair value of $41K (new award minus old award, both valued at the modification date), recognized over the remaining vesting period.

The check: the modified award's lifetime expense can never exceed original FV + incremental FV. The board asks "what did the repricing cost?" — the answer is $41K, not the headline value of the new options.

Largest awards

Grant	Granted	Shares	Strike	FV/share	Total FV	Status
#0 OPTION	2022-03	60,000	$8.40	$4.97	$339K	active
#18 RSU	2023-02	40,000	—	$6.99	$280K	active
#16 RSU	2022-12	40,000	—	$6.85	$274K	departed
#3 RSU	2022-02	40,000	—	$6.11	$244K	active
#33 RSU	2024-07	40,000	—	$4.63	$185K	active
#30 RSU	2024-04	40,000	—	$4.36	$174K	active
#20 OPTION	2023-04	40,000	$7.17	$4.26	$170K	active
#14 RSU	2022-10	20,000	—	$6.71	$134K	active

Option fair values are Black-Scholes at grant (vol 55%–62% by year, expected term 6 years, strike = 409A FMV at grant). Validation bounds every option FV between intrinsic value and the share price — the classic smell test for a mis-wired pricing input.

Validation — re-run before every publish

PASS engine == closed-form recomputation, 48 month-ends x 2 methods — max gap $0.000000 (sl (2025, 8))
PASS at full vesting, SL and graded both land on grant-date FV — 30 stayer awards, max gap $0.000000
PASS cumulative expense <= grant-date FV + incremental FV, always — hard ceiling on every award
PASS unrecognized + recognized = total FV for active awards — max gap $0.000000
PASS Aug-2025 RIF: unvested expense of 7 in-cliff grants reverses; the line dips — $73K reversed, monthly expense drops $86K vs July
PASS repricing: incremental FV > 0; modified award never exceeds original + incremental — incremental $41K on strike $8.40 -> $5.45
PASS option fair values bounded by intrinsic value and share price — Black-Scholes outputs sane for every option grant
PASS FY2025 expense positive under both methods — SL $0.62M / graded $0.39M

Synthetic, seeded data (random.seed(718)). Generator, engines, and checks: github.com/Lumimama/finance/stock-compensation.