By Cydney Posner

The SEC has issued a few more new or revised interps in connection with the enhanced disclosure requirements; however, the changes reflected primarily interps that have been withdrawn as no longer applicable under the new rules as a result of the change to reporting full grant date fair value. 

Executive Compensation; Summary Compensation Table

  • A company may provide the assumption information required by Instruction 1 to Item 402(c)(2)(v) and (vi) for equity awards granted in the company's most recent fiscal year by reference to the Grants of Plan-Based Awards Table if the company chooses to report that assumption information in that table.
  • Under FASB ASC Topic 718, the grant date of an equity incentive plan award that allows the compensation committee to exercise negative discretion (i.e., discretion to reduce the amount earned pursuant to the award, consistent with Section 162(m) of the IRC) at the end of the three-year performance period may, in certain circumstances, be deferred until the end of the performance period after the compensation committee has determined whether to exercise its negative discretion. Use of grant date fair value reporting in Item 402 generally assumes that, as stated in FASB ASC Topic 718, "[t]he service inception date usually is the grant date." The service inception date may precede the grant date, however, if the equity incentive plan award is authorized but service begins before a mutual understanding of the key terms and conditions is reached. In a situation in which the compensation committee's right to exercise "negative" discretion may preclude, in certain circumstances, a grant date for the award during the year in which the compensation committee communicated the terms of the award and performance targets to the executive officer and in which the service inception date begins, the award should be reported in the SCT and Grants of Plan-Based Awards Table as compensation for the year in which the service inception date begins. Notwithstanding the accounting treatment for the award, reporting the award in this manner better reflects the compensation committee's decisions with respect to the award. The amount reported in both tables should be the fair value of the award at the service inception date, based upon the then-probable outcome of the performance conditions. This same amount should be included in total compensation for purposes of determining whether the executive officer is an NEO for the year in which the service inception date occurs.

Item 402(c) - Executive Compensation; Grants of Plan-Based Awards Table

  • Where an NEO exercises "reload" options and receives additional options upon that exercise, the registrant is required to report the additional options as an option grant in the Grants of Plan-Based Awards Table. In the SCT, the registrant would include the grant date fair value of the additional options in the aggregate amount reported.

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