Dear all,
As everyone of us knows ESOP is a source of Potential Equity Shares. So while in calculation of PES in case of ESOP
PES = ESOP - ESOP *Excercise Price/Fair value.
Why this formula is used , can anybody explain me its significance along with proper explanations.
Boss i hope ESOP is not a source of potential Equity shares!
Investopedia explains Employee Stock Ownership Plan - ESOP
Employee stock ownership plans can be used to keep plan participants focused on company performance and share price appreciation. By giving plan participants an interest in seeing that the company's stock performs well, these plans are believed to encourage participants to do what's best for shareholders, since the participants themselves are shareholders.
There are so many benefits in ESOP such as tax planning, increased potential of working towards common objective, to reduce labou turnover etc..,
Therefore the formal is based on all the benefits!!
PES is a financial instrument or other contract that entitles or may entitle, its holders to equity shares
CAclubindia
