When a company issues some form of stock-based compensation to its employees, this triggers a number of rules regarding how to account for the transaction. This manual clarifies the situation for the accountant by describing the treatment of equity-based compensation. The valuation and expense recognition for these stock awards is discussed, along with the related concepts of employee stock ownership plans and employee share purchase plans. In addition, the views of the Securities and Exchange Commission are summarized. In short,
Accounting for Stock-Based Compensation
should be your key source of information when senior management starts to contemplate these types of compensation arrangements.