Archive for 2016

Update on ISS Performance Metrics for 2017

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Institutional Shareholder Services (ISS) has announced a new methodology for its pay-for-performance models which will become effective on February 1, 2017. The announcement states that additional criteria will be introduced as metrics for the evaluation of corporate performance for the evaluation of executive compensation programs.

In addition to the use of total shareholder return (TSR), ISS will present relative evaluations of:

• Return on equity
• Return on assets
• Return on invested capital
• Revenue growth
• EBITDA growth
• Growth in cash flow ...

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Changes to ASC Topic 718 Are On the Horizon

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In March of this year, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU 2016-09) entitled Improvements to Employee Share-Based Payment Accounting. This document describes changes to ASC Topic 718, which governs accounting for stock or other share-based compensation. This includes restricted stock, employee stock options, and relative total shareholder awards among other instruments. The changes to ASC 718 set forth in ASU 2016-09 will take effect for public companies for annual periods which begin after December ...

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IRS Proposes Changes to Section 409A Regulations

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On June 21, 2016, the IRS issued some proposed regulations which clarify or modify certain provisions of IRC Section 409A which have an impact on non-qualified deferred compensation and stock plans. Some of the proposed regulations have an effect on employee stock options (ESOs), restricted stock units (RSUs), and stock appreciation rights (SARs). Prior to this issue, the IRS had provided informal guidance on a case-by-case basis.

Although the text of the proposed regulations is lengthy, excellent commentary has been ...

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New Credentials Added by the AICPA

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On May 18, 2016, the 265-member governing council of the American Institute of Certified Public Accountants (AICPA) approved the creation of two new credentials in the area of fair value measurement.

http://www.aicpa.org/Press/PressReleases/2015/Pages/AICPA-Approves-Development-of-Two-Fair-Value-Measurement-Credentials.aspx

Unlike previous specialty credentials awarded by the AICPA, the new fair value credentials will be available to both CPA’s and non-CPA’s who meet the requirements set by the AICPA National Accreditation Committee. One of the new credentials will focus on the valuation of intangible assets while the other will ...

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Post Vest Holding Periods: No Consensus on the Impact on Grant-Date Fair Value

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Our previous two blog posts have addressed the inclusion of post-vest holding period restrictions in share-based payment awards. We are beginning to see such provisions in the awards our clients submit to us for valuation. We have implemented a number of models for the valuation of such provisions as part of a share-based payment award, and are ready and able to apply these models whenever they are called for. In light of the somewhat vague comments made by an employee ...

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Estimation of Discount from Grant-Date Fair Value for Share-Based Awards with Post-Vest Holding Periods

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In our previous blog post, we discussed comments by the SEC regarding the application of discounts to the grant-date fair value of share-based awards which include post-vest holding periods. In accordance with ASC 718-10-30-10, we consider the effect of the post-vest holding period on the grant-date fair value and estimate a discount. The academic literature presents a number of different models for the estimation of the discount, which depends upon the volatility of the company’s shares and the length of ...

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SEC Comments on Grant-Date Fair Value Discount for Share-Based Awards with Post-Vest Holding Periods

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We have noted a recent trend in incentive compensation practice regarding the inclusion of a Post Vest Holding Period as a provision in new awards. Post-Vest Holding Periods (PVHPs) require that any shares acquired as the result of the exercise of an ESO or the vesting of a TSR must be held for a specified period of time before they can be sold. Such provisions may result in a decrease in the fair value of the award, and afford an ...

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