Accounting Rules for Executive Compensation
   > see Stock Options - Grant Date Issues
 /Profits Interests

2017.03.15  Modification of Equity Awards. FASB's board has approved an update that will make the following clarifications, quoted here from this release

  • ​An entity should apply modification accounting in Topic 718 if a change to an award affects the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used), vesting conditions, or classification of the award.
  • The guidance should not explicitly state that an entity is permitted to apply judgment to evaluate whether a change to the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of an award is insignificant.

2016.08.18  Tax Withholding under Equity Plans.  A new FAQ C-1 from the New York Stock Exchange clears the way for employers to amend their equity award plans in order to allow for tax withholding up to maximum rather than minimum statutory levels.  This alternative emerged from a FASB change announced in April 2016 to raise the tax withholding level that is allowable under equity-based awards without disqualifying them from equity classification for expense purposes.

2016.04.16  Summary by Frederic W. Cook -- of Equity vs Liability Accounting. 

2015.07  PWC's Comprehensive Guide (downloadable)

2013.Oct.29  Delay of All Expense? Possible through CIC or IPO Contingency. Twitter's Form S-1 Amendment No. 1 (filed on Oct. 15, 2013) discloses the absence of any past financial expense for certain restricted stock units, aka RSUs, because their vesting was considered uncertain for GAAP purposes - due to being contingent on both future service and the completion of an IPO or change in corporate control.  Twitter's S-1 explains on pages 81-82 that the closing of the IPO will result in future RSU financial expense, due to satisfaction of the IPO condition.  This handling of the expense for stock-based awards is common, and may also apply to cash-based awards.  In each case, the lynchpin for deferred expense is the uncertainty of future vesting.  Thoughtful drafting and communication with financial experts are needed to assure this design brings the desired financial consequences without triggering adverse effects (with one key consideration being Code §409A).