In short
An employee stock purchase plan lets employees buy company shares, usually at a discount through payroll deductions. It is noncompensatory, with no expense, only if the discount is 5% or less, substantially all employees can take part, and it has no option features beyond a short enrollment period.
Key takeaways
- A plan with a larger discount, such as 15%, is compensatory and the cost is recognized.
- Look-back features, buying at the lower of two dates' prices, make a plan compensatory.
- The tax rules for these plans are separate from the accounting rules.
Where it's tested
BAR: Stock Compensation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An employee stock purchase plan is noncompensatory (no compensation cost is recognized) when, among other conditions: