Stock Compensation

Equity awards

• Grant-date fair value (option-pricing model) ÷ requisite service period; debit expense, credit additional paid-in capital (APIC).
• No remeasurement for price changes.
• Restricted stock units (RSUs): grant-date share price.

Conditions

• Service: straight-line or accelerated for graded vesting (cumulative ≥ vested portion).
• Performance: recognize if probable; catch-up adjustments.
• Market: in fair value; cost recognized even if not met.

Forfeitures

Estimate or record as they occur. Vested but expired unexercised → no reversal.

Liability awards

Cash-settled stock appreciation rights (SARs): remeasure at fair value every reporting date × portion of service completed.

Other

• Modification cost = new fair value − old fair value just before change.
• Employee stock purchase plan (ESPP): noncompensatory if broad, discount ≤ 5%, no look-back.
• Excess tax benefits and deficiencies → income tax expense.

Exam traps

• Grant date is when both parties understand the key terms and any required approval is obtained — not just the board meeting date.
• Awards fully vested at grant are expensed immediately.
• Since Accounting Standards Update (ASU) 2018-07, awards to nonemployees follow largely the same model as employee awards.