By: Cydney Posner

CompensationStandards.com is reporting that FASB told the Big Four accounting firms on Friday that, with respect to stock option grants and other equity awards, companies cannot fix the equity grant date at which expensing would begin until the material terms of the award have been communicated to employees. This would mean that companies will need to consider changing the way they have made equity awards in the past. The website recommends that, to comply with this new twist, companies consider:

  • Preparing option award agreements in advance so that they may be sent to optionees on the same date as approved by the Board (or Compensation Committee), or
  • Having the Board resolution specify an option award date sufficiently in the future to give the plan administrator time to prepare and send the award agreements, with the exercise price for the option award determined only on that future date.
IRS Circular 230 Notice: To the extent the above constitutes tax advice, under IRS Circular 230 I am obligated to inform you that it cannot be relied upon by you or any other taxpayer to avoid penalties.

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