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Financial Reporting: Performance Conditions
Financial Reporting: Performance Conditions

Set performance expectations to use in expense calculations

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Written by Product Team
Updated over a week ago

Companies with performance conditions must update performance condition expectations every period in order to calculate accurate expenses.

Please note

  • Performance condition expensing is only supported for grants with a single performance vesting trigger (including on top of a time-based schedule).

  • Overachievement (i.e. >100%) is currently not supported on Ledgy conditions.

How it works

Market conditions: customers should run an external valuation that simulates all possible outcomes and add this fair value via custom accounting. Performance expectations should be logged for record keeping however these will not affect the expense value.

Non-market (or event) conditions: customers should define expectations each reporting period (consisting of a target date and expectation %) that pro-rates the expense value (e.g. if the expense would normally be €100 but it only has a 50% probability of achievement, the expense will be €50).

  • Expense balance dates use the most recent expectation when a condition is in progress. Once achieved (or unachieved), the final evaluation data will be used for balances after the evaluation date. Thus, expectations are effectively only used for in progress, non-market conditions.

  • Ledgy expects termination transactions to be created for Unachieved or Partially Achieved conditions so that the expense is reversed (e.g. if 100 units are granted and there is 50% achievement, there should be a transaction terminating 50 units).

Expectations can be managed in Financial Reporting > Performance condition expectations:

Performance condition data will be displayed in dedicated columns in the report that affect downstream values:

Workflow

Both the core vesting condition and financial reporting expectations have to be managed accordingly.

Core vesting condition:

  1. Create core performance condition

  2. Add the condition to a grant’s vesting schedule

  3. Evaluate the condition when it is officially achieved or unachieved

  4. Terminate unachieved amount (if applicable)

Financial reporting expectations:

  1. Navigate to financial reporting

  2. Update expectations for performance conditions that are in progress

  3. Generate report period and review numbers

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