Restricted stock is recognized on the income statement over the service period.The value recognized for each restricted share is the same as its current share price (for non-dividend paying stock).Common stock and APIC is impacted immediately by the entire value at grant date but is offset by a contra-equity account, so there is no net impact. So that’s the basic accounting for restricted stock under GAAP. The key takeaways are: The same thing will happen on Januand again one final time on January 1, 2021. That’s not the case with stock options as we’ll see shortly.Ĭontra-equity – Unearned (deferred) Compensation Also notice that the value of each share of restricted stock recognized by Jones Motors on its balance sheet is equal to its current share price. It will only be recognized once it’s earned (i.e. Also notice that there is no income statement impact and no stock based compensation expense has been recognized yet. An equity account was created and was exactly offset by a contra-equity account. įirst, notice that nothing really happened. It will be reduced as the employees earn their awards.ĢCalculated as. The restricted stock accounting journal entries are as follows:Ĭontra-equity – Unearned (deferred) Compensation 1ġThe unearned compensation account is simply a contra-equity account to make the balance sheet balance.
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