2M RSU's were granted in 2012 and are vesting over a four year period. The RSU's are being "settled" using
What is the appropriate accounting treatment for RSU's which are settled with Treasury stock shares?
Answers
Since these are settled in stock, not cash, unless there are other "special" provisions not described above, the fair value is determined on the grant date per ASC 718 - the market value on grant date. This should be amortized over the service period (generally the vest period) and reduced by an estimated forfeiture rate, and trued up for actual forfeitures. So, on the final vest date, the expense should be equal to the shares that vested * the market value on the grant date. The fact that the stock price has declined since grant has no impact on the expense.
If these were cash-settled grants, the expense would be "marked to market" and the decline in stock price would be reflected in the expense.
Public companies often combat dilution by funding employee benefit plans using shares acquired in open market transactions. These “Held in Treasury” shares held are no longer considered outstanding for earnings-per-share purposes nor are they eligible to receive dividends nor do they carry any voting rights. From a balance sheet presentation these shares are recorded at cost (assuming they are not acquired significantly above-market), and are considered a contra equity item and subtracted from the stockholders equity.
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FP&A