ESPPs: Financial Reporting Complexity

Across the country, employee stock purchase plans (ESPPs) are on the rise. In addition, more ESPPs have exotic provisions, such as features allowing for contribution rate changes and reset or rollover provisions.

With this growth in ESPP popularity, there is increasing scrutiny surrounding the financial reporting for these programs. Traditional “pool-based” approaches are running into trouble with external auditors, who are concerned that the imprecision may have material consequences on the final results.

This issue brief, originally published in 2016 and newly updated for 2018, details the rise in popularity of ESPPs. It also looks at exotic design features that are intended to deliver more value, as well as financial reporting best practices.

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