|Methods and techniques|
Grant date is date of awarding. In business, grant date is mutual understanding of terms and conditions established by both, employer and employee of awarding an employee. At agreed date, employer issues the equity instruments or transfers the assets to an employee. For awards of equity instruments, the grant date is understood as the date when an employee begins to benefit from them. For example company might award an employee with stock option. . Value of reward is measured as fair value at grant date and it is called "measurement date". Agreement on grant date might be done in three ways :
- A formal, agreement in written form,
- An informal, arrangement in oral form,
- In other, past practice of company.
Inception date and grant date
The inception date should be established before the grant date, however the grant date usually covers the inception date - is such case below conditions have to be met:
- Firstly, an award is already authorized,
- Secondly, the beginning of the service is before mutual understanding, included in terms and conditions of reaching the award,
- Third condition is one of the below:
- terms of the award do not include request of future service conditions existing at the grant date,
- or the award has performance condition or market condition, that if is not met during the service period (following grant date and date of agreement inception), the award will forfeiture.
Option pricing model
The grant date is used also for option pricing model. Each of below variables are taken into account at specific grant date of:
- exercising the price,
- expected life of the option,
- option value,
- current market price of the common stock,
- vitality of the stock,
- expected dividends on the stock,
- free of risk interest rate for expected term.
Examples of grant dates
Below are two examples of meeting grant dates and financial calculations for them:
- Employer told employee that if he would work for next year, he would be grated with vested stock option. Exercise prices were equal granted stock price. An employee received award 31th of December.
- Employer promised employee that if he would increase of sales by 2% for health & beauty department, he would be granted with stock options by the end of that year. Exercise prices were equal to stock price at grant date so 31th of December, and moreover there was five years long vesting period.
- Stickney C. P., Weil R. L., Schipper K., Francis J. (2009) p.665
- KPMG, (2019), p.46
- Deloitte, (2018), p. 38
- Delves D. P., (2007), p.118
- Nikolai L. A., Bazley J. D., Jones J. P., (2009), p. 795
- Delves D. P., (2007), p. 119
- Deloitte, (2018), A Roadmap to Accounting for Share-Based Payment Awards', Deloitte
- Delves D. P., (2007),2008 CCH Accounting for Compensation Arrangements, Cch Accounting
- KPMG, (2019), Share-Based Payment. Handbook. US GAAP, KPMG
- Nikolai L. A., Bazley J. D., Jones J. P., (2009), Intermediate Accounting (Book Only). Available Titles Cengage NOW Series, Cengage Learning
- Pwc, (2016), Accounting for Sharebased Payments IFRS 2, Pwc
- Stickney C. P., Weil R. L., Schipper K., Francis J. (2009), Financial Accounting: An Introduction to Concepts, Methods and Uses, Cengage Learning
Author: Kinga Kutek