The measurement date of a stock option refers to the first day when two key pieces of information are known: (1) the number of shares an employee will receive and (2) the option or purchase price, if applicable. This date is crucial for determining the fair value of stock options under Generally Accepted Accounting Principles (GAAP).
This term is primarily used in the context of corporate finance and accounting. It plays a significant role in the valuation of stock options for financial reporting purposes. Legal professionals, accountants, and corporate compliance officers often deal with measurement dates when preparing financial statements or assessing stock option grants. Users can manage related documents and procedures using templates available from US Legal Forms.
Here are a couple of examples of abatement:
Example 1: A company grants stock options to an employee on March 1, 2023. The employee is entitled to receive 1,000 shares at a purchase price of $10 per share. The measurement date is March 1, 2023, as both the number of shares and the purchase price are known.
Example 2: A startup offers stock options to a new employee. On the date of the offer, the company specifies that the employee will receive 500 shares at a price of $15 per share. This date is the measurement date as it meets the criteria set by GAAP. (hypothetical example)
| Term | Definition | Differences |
|---|---|---|
| Grant Date | The date on which a stock option is awarded to an employee. | The measurement date focuses on the valuation criteria, while the grant date is about the award itself. |
| Exercise Date | The date when the employee can purchase the shares at the specified price. | The exercise date comes after the measurement date and relates to the option's execution. |
If you are involved in stock options, ensure you understand the measurement date and its implications for financial reporting. Consider using US Legal Forms to access templates that can help you manage stock option agreements and related documents. If your situation is complex, it may be beneficial to consult a legal professional for tailored advice.
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The measurement date is important for determining the fair value of stock options under GAAP, impacting financial statements.