A couple of weeks ago, I blogged
about a tender offer to accelerate vesting on RSUs and discussed some
of the accounting ramifications. Since then, I've learning that the
accounting treatment is less straightforward than I thought. We
recently posted a Radford alert on this topic in our Underwater Options Portal; today I discuss what I learned from the alert with respect to the incremental cost for an acceleration of vesting.

Acceleration Vesting Can Be More Expensive Than You Think
Up
until now, my understanding was that when vesting is accelerated for
awards that aren't subject to imminent forfeiture (i.e., an
acceleration that is not in connection with termination of employment),
there would be no incremental cost for the modification because the
awards were expected to vest before the acceleration occurred. But,
this isn't the case. In fact, a portion of the awards were not expected
to vest--the forfeitures that the company estimated would occur for
expense attribution purposes. Thus, for this portion of the awards, the
vesting acceleration results in incremental cost equal to their current
fair value.

For example, let's assume that vesting is accelerated on 1,000,000
restricted stock units when the market value of the underlying stock is
$5 per share. Prior to the acceleration, the company expected that 10%
of the awards would have been forfeited due to employees terminating
before their original vest dates.  For the 900,000 awards that were
expected to vest anyway (even without the acceleration), there is no
incremental cost. But for the 100,000 awards that weren't expected to
vest, the company incurs incremental cost of $500,000. (The fair value
of these awards prior to the acceleration is $0; afterwards it is $5
per share.)

If the stock price has declined since the awards were granted, this
cost is less than the grant date fair value of that 10% of the awards
(which now will not be recognized).  But it's still more than the
expense the company would have recognized if vesting hadn't been
accelerated and the awards had been forfeited.

Tune in next week when I discuss fun and interesting things you
never knew about the service period of underwater options (or, if you
just can't wait, you can spoil the surprise by reading the Radford
Alert "Accelerated Vesting of Underwater Options: Understanding or Discovering the Hidden Accounting," available in the NASPP's Underwater Options Portal).

Reason #14 to Renew Your NASPP Membership: Your Local NASPP Chapter
When
was the last time you attended one of your local NASPP chapter
meetings?  NASPP chapters are a great way to meet others in the
industry and keep up on current developments. Many chapters host
top-notch speakers at very well-attended meetings.  Learn more about
your local NASPP chapter by visiting the chapter pages
on Naspp.com.  Even better, consider getting involved.  Volunteering
with your local chapter can greatly expand your professional network
(so important during times of economic downturn) and you'll have the
opportunity to help decide meeting topics.   

Submit Your Proposal for the 2009 NASPP Conference Now
We
are accepting speaking proposals for the 2009 NASPP Conference through
this Friday, February 27.  For more information, visit our Proposal Submission Website. 
We begin evaluating proposals as soon as the submission period ends, so
we can't make any exceptions to this deadline, no matter how dire the
circumstances. So if you feel a cold coming on, plan accordingly! 

We have not yet announced where the Conference will be or the exact
dates.  As soon as we know more, I promise to announce it here in my
blog.

NASPP "To Do" List
We have so much going on here
at the NASPP that it can be hard to keep track of it all, so I keep an
ongoing "to do" list for you here in my blogs. 

• Renew your NASPP membership for 2009 (if you aren't an NASPP member, join today).


• Submit your speaking proposal for the 2009 NASPP Annual Conference.


• Register for the NASPP's newest online course "Tackling Equity Compensation Issues Related to Mergers & Acquisitions."

- Barbara