Grant date definition
/What is the Grant Date?
A grant date is the date on which a stock option or other equity-based award is granted to the recipient. The grant date is considered to be that date on which an employer and an employee agree upon the most essential terms and conditions associated with the award. If shareholder approval is needed, then the grant date is considered to be delayed until that approval has been obtained, unless shareholder approval is considered to be perfunctory. The same consideration applies when approval by the board of directors or a member of management is required.
Grant Date Example
As an example of a grant date, Big Tree Corporation grants its sales manager 10,000 stock options as part of her annual compensation plan. The grant date of these options is January 1, 2024. This is the designated date on which she receives the options, and represents the beginning of her vesting period. The stock options have a vesting schedule that spans five years, where 20% of the options will vest after one year, another 20% after two years, and so forth. By January 1, 2029, all 10,000 stock options will have fully vested.
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FAQs
Can the grant date differ from the award communication date?
Yes, the grant date can differ from the award communication date. If the communicated award is subject to board approval, changes in terms, or other contingencies, a grant date is not established until those conditions are resolved and there is a mutual understanding of the final terms. Until then, the communication represents an intent to grant rather than a completed grant under ASC 718.