Pulley Shutdown and Your Year-End ASC 718 Audit: What Finance Teams Should Prepare
Author: Redwood Valuation Content Team
Published: September 24, 2026
If your company has a December 31 fiscal year-end, Pulley's shutdown lands at an awkward point in the accounting calendar. Pulley has said the app will no longer be accessible as of December 8, 2026, although data will remain available in a limited format through January 31, 2027. The audit of 2026 stock-based compensation will generally happen after that. If your team used Pulley's stock-based compensation tool to calculate grant-date fair values, expense, and footnote disclosures, the system that produced those numbers will likely no longer be available by the time your auditors ask how they were derived. This article covers what to save before the shutdown, how Pulley's tool calculated those figures, and what to reconcile once your equity records live somewhere else.
Stock Compensation Records to Save Before December 8
Our Pulley shutdown checklist covers the 409A valuation file itself. For the stock-based compensation audit, save these as well:
Stock-based compensation reports for the current year and each prior audited year, including footnote disclosure schedules
A saved copy of Pulley's stock-based compensation methodology guide and FAQ
Grant-level fair value detail showing the assumptions used for each grant
Underlying award terms and grant data used in the calculations, including grant date, exercise price, vesting schedule, and contractual expiration date
The peer company set and resulting volatility used in each report run
Roll-forward schedules of grants, exercises, expirations, and forfeitures
Calculations for any modifications or repricings
The list of items your auditors requested last year and what you provided
Export these in a format your team can reopen without Pulley, and note the date each report was run. If you adjusted any input manually, such as volatility, keep a record of what you changed and why.
How Pulley's Stock-Based Compensation Tool Calculated Your Numbers
Pulley's help center explains how its stock-based compensation tool worked. That methodology matters because your auditors may test the inputs, assumptions, and accounting treatments behind the reports. The tool generally supported options, RSUs, and RSAs subject to service vesting conditions only; it did not support awards with performance or market vesting conditions, accelerated recognition, or liability-classified awards. For stock options within that scope, it used the Black-Scholes option pricing model.
The share price input came from the common-stock value in the 409A valuation in effect at the grant date in the company's Pulley profile. Pulley used an expected volatility that was either entered by the company or derived from peer companies selected for the report. The company could also change the volatility input manually. Pulley determined expected term using the nonpublic-entity practical expedient in ASC 718-10-30-20A and 20B: the midpoint between the employee's requisite service period (or the nonemployee's vesting period) and the contractual term. For nonemployee awards, Pulley also allowed a manual override if the entity elected to use the contractual term as expected term. The risk-free rate came from Treasury par yield curve rates matched to the expected term, and dividend yield defaulted to zero. For RSUs and RSAs within the tool's scope, Pulley used the common-stock value from the 409A valuation as the current price of the underlying share.
Beyond the valuation inputs, Pulley's reports also depended on how compensation cost was recognized. Pulley's methodology guide says the tool defaulted to accounting for forfeitures as they occur. Pulley implemented that default as a 0% estimated forfeiture rate, though it also allowed an estimated rate. For employee awards with graded vesting based only on a service condition, ASC 718 permits either accelerated or straight-line attribution; Pulley supported only straight-line recognition. Pulley's straight-line method also had a floor for those employee awards: at any date, recognized compensation cost was the greater of the straight-line amount or the grant-date fair value of the vested portion of the award.
Nonemployee awards follow a different attribution principle. Pulley warns that compensation cost is recognized in the same period and in the same manner as if cash were paid for the goods or services, so its contractual-vesting approach may not always produce the appropriate cost-recognition pattern. The policy elections belong to your company, and the nonemployee recognition rule applies regardless of the software. A migration should preserve the applicable elections and recognition treatment. Any proposed policy change should be evaluated with your auditors.
What to Reconcile After Migration
Once your equity records move to Carta or another platform, the new system will either import historical expense or recalculate it. Before your auditors test the migrated records, check three things.
Cumulative expense and the 2026 cutover. The cumulative expense carried into the new system from periods already audited should tie to prior audited financial statements. For 2026, separately reconcile expense through the migration date and from cutover through year-end so the transition does not duplicate or omit current-year expense. If either reconciliation does not tie, find out whether the difference comes from a methodology change, how grant data was mapped, or the cutover itself.
Carta, for example, says its financial reporting add-on can calculate historical expense and provide a one-time historical-expense adjustment after the company confirms its cap table includes all historical transactions. Its public materials do not explain how a Pulley stock-compensation history is handled during migration. Before year-end close, confirm whether prior expense will be imported, recalculated, or bridged through an adjustment.
Methodology. Compare the new system's defaults with the accounting policy elections and valuation assumptions used in the Pulley reports. Two of those choices can be accounting policy elections within their applicable scopes: straight-line versus accelerated attribution and forfeitures as they occur versus estimated. For a nonpublic entity, electing the midpoint practical expedient for qualifying awards is also an entity-wide accounting policy election. The expected-term figure produced by that method and the selection of peer companies used to derive volatility are valuation assumptions. A different default is not necessarily wrong, but a software migration should not change either category by accident. Evaluate any accounting-policy change with your auditors. Document any change in valuation assumptions rather than letting a platform default make the change silently.
Grant-date inputs. For each grant, the share price input should match the 409A valuation your company relied on at the grant date. That valuation should also have been reasonable to use at the grant date: no more than 12 months old and not overtaken by material events. A migration is a good moment to confirm that each grant is linked to the correct valuation, because an error there flows directly into fair value and expense.
Where Your 409A Valuation Fits in the Audit
The 409A valuation is not just a tax document in this process. Pulley also used it as the common-stock price input for option, RSU, and RSA fair values. Under ASU 2021-07, nonpublic entities may use a reasonable application of a reasonable valuation method to determine that current price input for equity-classified awards. FASB cites a valuation performed in accordance with the Section 409A regulations as an example. That guidance is the basis for the 12-month and material-information check in the grant-date inputs section above. If an auditor questions a grant-date fair value, the supporting 409A valuation may become part of the audit trail. We explain how the 409A fair market value and ASC 718 grant-date fair value relate in [409A Valuations Pre-IPO: What Changes as You Approach an Offering]. We also explain in our article, “Does Pulley's Shutdown Invalidate Your 409A Valuation?” why the shutdown does not undo a Pulley valuation, though it does put support at risk.
Support for your Pulley-issued valuations is therefore part of audit readiness, not a separate question. Pulley's FAQ says its team will no longer be available to support customers as of December 8. It also says Carta will "support the defense" of Pulley's prior 409A valuation work for customers who transition, but does not define what that phrase means for a financial-statement audit. Before fieldwork, confirm what support is actually included and who will answer auditor questions and provide the supporting valuation records. If you are going elsewhere, arrange audit support separately.
Preparing for a Smooth Year-End
The practical sequence is short. Save the reports and supporting records now. Confirm how your next system will handle historical expense and which accounting elections and valuation assumptions it will apply. Reconcile cumulative expense, the 2026 cutover, and grant-date inputs before year-end close. Then make sure someone is prepared to answer auditor questions about the 409A valuations your fair values depend on.
Redwood is an independent valuation firm specializing in 409A valuations, which supply the share price input to your stock compensation calculations. If your company is moving away from Pulley, we take over future valuation work and include support for audit questions about the prior year's Pulley valuation.
Talk to Redwood before your year-end audit.