New rules make it easier, but traps remain for awards that are not carefully structured.
By Kei Morita
Holthouse Carlin & Van Trigt LLP
Kei Morita is a principal in the Los Angeles office of Holthouse Carlin & Van Trigt LLP.
With the war for talent at a fever pitch these days, stock-based compensation (SBC) is one of the most effective ways for private companies to attract and retain valued workers. It’s also a very effective way for early-stage companies and other private entities to preserve cash flow while allowing key employees to share in the company’s growth. But the SBC accounting rules and calculations can be very complex.
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While FASB and the Private Company Council (PCC) issued guidance late last year to make it somewhat easier for private companies to account for share-based awards, many challenges still remain. If you’re a CFO, controller, treasurer, HR director or another stakeholder in a privately held company – or have clients that are privately held companies – it’s critical to follow the SBC accounting rules correctly.
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