Corp_Buyer re RSUs and different time periods
The RSU component of the new compensation plan is confusing, and has never been adequately explained. I'll offer up what I think is a possible explanation, but I could certainly be wrong on this issue.
RSUs are recorded into accounting book expense as they vest. The market value of the stock on the date of the RSU grant is accrued into expense over the vesting period. The first round of RSUs issued under the new compensation plan were issued in 2004, and have a two-year vesting period. Therefore the 2004 RSU grants will be expensed for accounting purposes over 2004 and 2005.
Another wave of RSU grants were made in January and February of 2005. If Fagan is correct about 2007, then apparently these 2005 RSU grants vest over a three-year period, rather than two years. The vesting period can be changed with each RSU grant btw. Therefore the 2005 RSU grants will be recorded into accounting expense over the years 2005, 2006, and 2007.
Thus in the year 2005, IDCC will begin to encounter expense for more that one RSU grant. The second-year vesting part of the 2004 RSU grant will be expensed in 2005, as well as the first-year part of the 2005 grant vesting in 2005.
One side note about RSUs. The income tax treatment is a little different than the accounting treatment. For income taxes purposes, the market value of the stock on the vesting date is taxable income to the recipient. For accounting purposes the expense is the vested part of the market value at the date of the RSU grant. Hopefully the cash portion of the new compensation plan will be enough to help them cover the tax liability associated with vesting RSUs, without their having to sell the stock to do so.
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