SEC Issues Staff Accounting Bulletin on “Spring-Loaded” Compensation Awards to Executives

The SEC staff has issued Staff Accounting Bulletin (SAB) No. 120, which provides “guidance for companies about how to properly recognize and disclose compensation cost for ‘spring-loaded awards’ made to executives.” Specifically, this SAB addresses “estimating the fair value of share-based payment transactions in accordance with Topic 718 regarding the determination of the current price of the underlying share and the estimation of the expected volatility of the price of the underlying share for the expected term when the company is in possession of material non-public information.” The purpose of SAB 120 is to align the interpretive guidance on this topic in the SEC’s SAB series with that in the FASB’s ASC 718.

For more information, see the press release on the SEC’s Web site.