In connection with the February 28 effective date of the Securities and Exchange Commission’s new executive compensation disclosure rules, on March 1, the SEC’s Division of Corporation Finance updated related Compliance and Disclosure Interpretations (C&DIs).
The SEC’s revised guidance on executive compensation disclosures included the following revisions to previous C&DIs:
- Issuers may disclose the assumptions in determining the grant date fair value of equity-based awards required to be included in their Summary Compensation Table (SCT) by reference to the Grants of Plan-Based Awards Table (Awards Table) if the issuer chooses to report such assumption information in that table.
- Where a named executive officer exercises “reload” options and receives additional options upon such exercise, the issuer is required to report the additional options as an option grant in the SCT and the Awards Table and at the grant date fair value of the additional options.
The SEC also added a C&DI addressing the year of reporting in the SCT and Awards Table for an equity plan award over a multi-year performance period where the compensation committee retains negative discretion to reduce the award until the end of the performance period. While Financial Accounting Standards Board Accounting Standards Codification Topic 718 provides that negative discretion may cause, in certain circumstances, the grant date of the award to be deferred for financial statement reporting until the date of the compensation committee’s final decision, the staff believes that the grant should be reported in the SCT and the Awards Table in the year in which service begins in the multi-year period because this better reflects the compensation committee’s decisions. The amount reported in both tables should be the fair value of the award at the service inception date, based upon the then-probable outcome of the performance conditions.
Click here to view the C&DIs (Questions 119.16 and 119.24 and Interpretation 220.01) under Regulation S-K.