In short
A restricted stock unit (RSU) is a promise to deliver company shares to an employee once vesting conditions, usually continued service, are met. For equity-classified units, compensation cost is the grant-date fair value of the shares, recognized over the service period.
Key takeaways
- With cliff vesting after four years, a quarter of the total cost is recognized each year.
- Forfeitures are either estimated or recognized as they occur, by policy election.
- Units settled in cash are liabilities and are remeasured each reporting date.
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
A company grants 10,000 stock options with a grant-date fair value of $6 each, vesting over three years. What compensation expense is recognized in year one, assuming no forfeitures?