FASB Clarifies Grant Date for Stock and Option Awards

When FASB adopted the revisions to Financial Accounting Statement 123 regarding Accounting for Share-Based Payments in 2004 (referred to as FAS 123R), a definition of “grant date” was included. That definition specified that the “grant date” was the date at which an employer and an employee reach a “mutual understanding of the key terms and conditions” of a share-based payment award. Awards subject to shareholder or board of directors approval are not to be considered granted until such approval was obtained, unless approval is essentially perfunctory. The relevance of the term “grant date” is that the value of the award is to be estimated as of the grant date.