The SEC's press release notes that proxy disclosure of stock-based compensation will change as follows:
The amended rule requires companies to report the value of options when they are awarded to executives (the aggregate grant date fair value), instead of the current requirement to report the annual accounting charge.
As described by Corp Fin staff member Sean Harrison during the open commission meeting, the Final Rule will require disclosure of the full grant date fair value (in accordance with FASB Codification Topic 718) He noted this is a change from the current SEC disclosure requirement, which calls for disclosure of the “dollar amount recognized for financial statement reporting purposes.” He added, “The amendment would include an instruction clarifying the amount to be included in the [compensation] tables is the value at grant date based on probable outcome.. not maximum potential value… [However] maximum potential [value] would be .. disclosed in footnotes.”
In response to a question from Chairman Mary L. Schapiro, Corp Fin Director Meredith Cross explained:
Under the current rules, the disclosure of the accounting charge flows through year after year after year, not withstanding whatever it is that the comp committee is doing in a given year. As a result, there is a significant disconnect between the option amount recorded in the Summary Compensation Table, and what the comp committee has been doing in paying the executives. The rule as changed would include a number that is reflective of what the comp committee thought they should pay the executives , which we think is much more consistent with the purposes of our rule.
The Final Rule states:
We are persuaded that the value of performance awards reported in the Summary Compensation Table, Grants of Plan-Based Awards Table and Director Compensation Table should be computed based upon the probable outcome of the performance condition(s) as of the grant date because that value better reflects how compensation committees take performance-contingent vesting conditions into account in granting such awards. We are adopting new Instructions to these tables to clarify that this amount will be consistent with the grant date estimate of compensation cost to be recognized over the service period, excluding the effect of forfeitures. To provide investors additional information about an award’s potential maximum value subject to changes in performance outcome, we will also require in the Summary Compensation Table and Director Compensation Table footnote disclosure of the maximum value assuming the highest level of performance conditions is probable. Such footnote disclosure will permit investors to understand an award’s maximum value without raising the concerns associated with requiring its tabular disclosure....
...To facilitate year-to-year comparisons, consistent with our proposal, we will implement the Summary Compensation Table amendments by requiring companies providing Item 402 disclosure for a fiscal year ending on or after December 20, 2009 to present recomputed disclosure for each preceding fiscal year required to be included in the table, so that the stock awards and option awards columns present the applicable full grant date fair values, and the total compensation column is correspondingly recomputed. The stock awards and option awards columns amounts should be computed based on the individual award grant date fair values reported in the applicable year’s Grants of Plan-Based Awards Table, except that awards with performance conditions should be recomputed to report grant date fair value based on the probable outcome as of the grant date, consistent with FASB ASC Topic 718. In addition, if a person who would be a named executive officer for the most recent fiscal year (2009) also was disclosed as a named executive officer for 2007, but not for 2008, the named executive officer’s compensation for each of those three fiscal years must be reported pursuant to the amendments.
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The amended rule requires companies to report the value of options when they are awarded to executives (the aggregate grant date fair value), instead of the current requirement to report the annual accounting charge.
As described by Corp Fin staff member Sean Harrison during the open commission meeting, the Final Rule will require disclosure of the full grant date fair value (in accordance with FASB Codification Topic 718) He noted this is a change from the current SEC disclosure requirement, which calls for disclosure of the “dollar amount recognized for financial statement reporting purposes.” He added, “The amendment would include an instruction clarifying the amount to be included in the [compensation] tables is the value at grant date based on probable outcome.. not maximum potential value… [However] maximum potential [value] would be .. disclosed in footnotes.”
In response to a question from Chairman Mary L. Schapiro, Corp Fin Director Meredith Cross explained:
Under the current rules, the disclosure of the accounting charge flows through year after year after year, not withstanding whatever it is that the comp committee is doing in a given year. As a result, there is a significant disconnect between the option amount recorded in the Summary Compensation Table, and what the comp committee has been doing in paying the executives. The rule as changed would include a number that is reflective of what the comp committee thought they should pay the executives , which we think is much more consistent with the purposes of our rule.
The Final Rule states:
We are persuaded that the value of performance awards reported in the Summary Compensation Table, Grants of Plan-Based Awards Table and Director Compensation Table should be computed based upon the probable outcome of the performance condition(s) as of the grant date because that value better reflects how compensation committees take performance-contingent vesting conditions into account in granting such awards. We are adopting new Instructions to these tables to clarify that this amount will be consistent with the grant date estimate of compensation cost to be recognized over the service period, excluding the effect of forfeitures. To provide investors additional information about an award’s potential maximum value subject to changes in performance outcome, we will also require in the Summary Compensation Table and Director Compensation Table footnote disclosure of the maximum value assuming the highest level of performance conditions is probable. Such footnote disclosure will permit investors to understand an award’s maximum value without raising the concerns associated with requiring its tabular disclosure....
...To facilitate year-to-year comparisons, consistent with our proposal, we will implement the Summary Compensation Table amendments by requiring companies providing Item 402 disclosure for a fiscal year ending on or after December 20, 2009 to present recomputed disclosure for each preceding fiscal year required to be included in the table, so that the stock awards and option awards columns present the applicable full grant date fair values, and the total compensation column is correspondingly recomputed. The stock awards and option awards columns amounts should be computed based on the individual award grant date fair values reported in the applicable year’s Grants of Plan-Based Awards Table, except that awards with performance conditions should be recomputed to report grant date fair value based on the probable outcome as of the grant date, consistent with FASB ASC Topic 718. In addition, if a person who would be a named executive officer for the most recent fiscal year (2009) also was disclosed as a named executive officer for 2007, but not for 2008, the named executive officer’s compensation for each of those three fiscal years must be reported pursuant to the amendments.
With the way technology and software has evolved, it has become easy for anyone to monitor the activity on the Internet. It's a reply of mind, especially when you consider all the personal things and your personal online. Would you like to make your Internet browsing experience enjoyable and worry-free? Proxy sites will be the only thing you need.
To make Internet browsing more secure and private, experts recommend using a different proxy sites for each session. Juvos.com features a regularly updated list of all the best and latest proxy site that will allow you to surf (private) long, long time.
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