"Change in control" of an entity and Share based payments (FAS 123R)

When do you accrue the liability for the share based payment awards (i.e. restricted share units (RSU) / performance share units (PSU)) if the RSU/PSU units are vested due to change in control provision. Is it based on the change of control date (assume February 28, 20X1) OR can an entity accrue the liability on the date it is "probable" that the payout would be made (assume December 31, 20XX)?

Answers

Mark Stokes CFO • October 22, 2009

I can see that going either way based on just how probable the transaction is. Probable is one of those words that should be banned from accounting - it's just too loose. Who determines what "probable" means in each case? Does it make it better if your auditor agrees that an event is probable? This is a great case to ask about b/c deals can and often do fall apart at the eleventh hour. Thus, facts and circumstances will lead you to make a decision based on your best judgment of the risk of not reporting a material liability vs. the probability that an event won't happen.

Sunil Thukral Controller/Technical Accounting Advisory/ SEC Reporting • October 22, 2009

Hi Mark,

Thanks for your comments. If accunting was really black and white, we would not have "probable" included in GAAP. :-)

Anyone else in the group who has encountered this situation before?

Regards,
Sunil

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"Change in control" of an entity and Share based payments (FAS 123R)

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