Two weeks ago, I stated that my next three blogs would be on recurring proxy statement disclosure issues (previously I discussed the need to review Item 405 disclosures and Form 4 reporting for performance shares). Then chaos ensued. I am finally getting out this last one on performance share reporting.

Nearly every company in America is making at least some of its equity award performance-based. Many have done so for years. In addition to the Form 4 reporting, two other questions we receive frequently relating to the unique reporting status of performance shares (or units) are the following.

Reporting Performance-Based Awards that Vest on the Last day of the Fiscal Year

Generally, performance share awards vest at the end of a fiscal year if the requisite performance criteria are met. However, as noted above, shares are not distributed until after the compensation committee certified that the criteria have been met, usually after audited financials are complete. In this typical situation, the performance shares in question would be reportable in the “Stock Vested Table” for the completed fiscal year and not in the “Outstanding Equity Awards at Year End Table,” despite the fact that the shares were not actually delivered until after the fiscal year end.

Reporting Performance-Based Awards in the Summary Compensation Table

Performance share awards made in a fiscal year are reportable in the Summary Compensation Table for that year. According to Instruction 3 to Item 402(c)(2)(v) and (vi), the corporation should report the grant date value of any awards that are subject to performance conditions based upon the probable outcome of such conditions. This amount should be consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718 (excluding the effect of estimated forfeitures). However, if the corporation discloses an amount less than the maximum in the Summary Compensation Table, the corporation must disclose the value of the award, assuming that the highest level of performance conditions will be achieved, in a footnote to the table.