Archive for 'News'

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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Twitter IPO Prompts Senators to Renew Call to Eliminate “Loophole”

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On the eve of the high-profile Twitter IPO last week, Senators Carl Levin (D – Michigan) and John McCain (R – Arizona) issued a joint statement calling for the elimination of the corporate tax deduction (“loophole”) for share-based compensation of employees at fair value. Invoking the federal deficit and the horror of the “sequester,” these gentlemen further stated that the “Joint Committee on Taxation has estimated that ending this tax break would raise $23 billion for the US Treasury.”

Now, we’re ...

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CEO to Worker Pay Ratio Disclosure Open for Comments

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On September 18, 2013, the SEC voted 3 to 2 to propose a rule which would require public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees. The new rule is required under Section 953(b) of the Dodd-Frank “Wall Street Reform and Consumer Protection Act” of 2010. The proposed rule was published in the Federal Register of October 1, 2013. Interested parties have until December 2, 2013 to ...

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Share-Based Payment > Best Practice Series > Dow 30 FY2012

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As part of our Share-Based Payment (SBP) Best Practice Series, Montgomery Investment Technology is pleased to provide you with our research which focuses on the valuation techniques and disclosures based on the 2012 10-K and DEF14A filings of the Dow Jones Industrial Average companies. We have compiled a two page report illustrating how the Dow 30 companies are complying with Accounting Standards Codification 718 (formerly FAS 123R) and what forms of Share-Based Payments each company provides. This report ...

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Headwinds for Employee Stock Options

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For the past five years, US equities have been on a stunning uptrend, with the S&P 500 Exchange Traded Fund (ETF: SPY) increasing from 94.55 for the week of June 1, 2009 to 164.80 for the week of June 3, 2013. This move has been good news for recipients of employee stock options (ESOs) and other forms of share-based payment. Recent comments by Federal Reserve Chairman Ben Bernanke have been met with dramatic responses in both equity and ...

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Employee Stock Options: Tax Loophole or Tax Deduction?

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Much has been said about some of the high profile IPOs in recent years (Zynga, Facebook, Groupon, LinkedIn) questioning whether the tax deduction that the corporations are receiving is justifiable when the companies have a pre-tax income.

Facebook is an excellent example. Pre-tax, they managed to swing to a profit. After income taxes, they are to receive an approximately $500 million refund.

There are a couple of reasons for this situation:

Net Operating Loss carry ...

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