Sample Restricted Stock Forfeiture Accounting
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How to fill out Sample Restricted Stock Purchase Agreement Between Intermark, Inc. And Purchasers?
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FAQ
Restricted stock units give employees interest in their employer's equity but have no tangible value until they are vested. The RSUs are assigned a fair market value (FMV) when they vest. Restricted stock units are considered income once vested, and a portion of the shares is withheld to pay income taxes.
Under ASC 718, if a company has a policy to estimate forfeitures, then it is required to develop an assumption regarding the pre-vesting forfeiture rate beginning on the grant date. The forfeiture estimate impacts the estimated amount of compensation expense to be recorded over the requisite service period.
Accounting for Restricted Stock/RSU Grants In general, future compensation expense related to restricted stock grants is based on the fair value of the stock on the grant date. The compensation expense is then recognized over the employees' service/vesting period.
ASC 718 is an abbreviation of Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 718, Compensation?Stock Compensation. That is a mouthful, but the basic purpose of ASC 718 is to outline how companies should expense equity awards in their income statements.
For example, assume that a company grants 10,000 RSUs that vest over four years. If the stock price remains at $15 for the entire four years, the value of the RSUs is $150,000. In this same scenario, stock options that have a strike price of $15 would be entirely worthless unless the stock price goes up.