what are share based employee benefits...........
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please help!!
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4.5 EMPLOYEES STOCK OPTION
The Companies (Amendment) Act 2000 has inserted a new clause (15 A) in section 2 of the
Companies Act, 1956, which states that "employee stock option" means the option given to
the whole-time directors, officers or employees of a company, which gives such directors,
officers or employees the benefit or right to purchase or subscribe at a future date, the
securities offered by the company at a pre-determined price.
Securities and Exchange Board of India issued Employees Stock Option Scheme and
Employee Stock Purchase Scheme Guidelines in 1999 under section 11 of the Securities and
Exchange Board of India Act, 1992.
Accounting for employees stock option plan (ESOPs): Before proceeding on accounting
treatment of ESOPs, certain words are necessary to be defined which will be covered later on
in the context of accounting entries.
Grant : Grant of the option means giving an option to the employees to subscribe to the shares
of the company.
Vesting : It is the process by which the employee is given the right to apply for shares of the
company against the option granted to him in purchase of employee in pursuance fo ESOS.
Vesting Period : It is the time period during which the vesting of the option granted to the
employee on pursuance of employee stock option scheme (ESOS) takes place.
Option : Option means a right but not an obligation granted to an employee in pursuance of
ESOS to apply for shares of the company at a pre-determined price
4.5.1 Accounting Policies of ESOS :
(a) In respect of options granted during any accounting period the accounting value of the options
shall be treated as another form of employee compensation in the financial statements of the
company.
(b) The accounting value of options shall be equal to the aggregate, over all employee stock
options granted during the accounting period, of the fair value of the option.
1. Fair value means the option discount, or, if the company so chooses, the value of
the option using the Black Scholes formula or other similar valuation method.2. Option discount means the excess of the market price of the share at the date of
grant of the option under ESOS over the exercise price of the option (including upfront
payment, if any).
(c) Where the accounting value is accounting for employee compensation in accordance with 'b',
the amount shall be amortised on a straight-line basis over the vesting period.
(d) When an unvested option lapses by virtue of the employee not confirming to the vesting
conditions after the accounting value of the option has already been accounted for as
employee compensation, this accounting treatment shall be reversed by a credit to employee
compensation expense equal to the amortized portion of accounting value of the accounting
value of the lapsed options and a credit to deferred employee compensation expense equal to
the unamortized portion.
(e) When a vested option lapses on expiry of the exercise period, after the fair value of the option
has already been accounted for as employee compensation, this accounting treatment shall
be reversed by a credit to employee compensation expense
for more details plz refer page no 3.124 &3.125 of pcc accounting book
thanks a lot for your timely reply........
welcome
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