olddog and wireless waz, appreciate the help in trying to understand the accounting procedure IDCC is using to expense RSU grants. Looks more bullish with each page we turn!
From olddog's ref post:
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“As stated in the 10-K, IDCC is using accelerated amortization to calculate the expense charge for the RSU grants. Accelerated amortization of RSU grants is a new accounting procedure, and I am still trying to get some background on it. However, it is obvious that the procedure results in much higher first year costs than straight amortization. In an example of the expense calculation of a grant with a four year vesting period, instead of the normal 25%/year expense charge, using accelerated amortization results in a first year charge of 52%.”
To amplify that post, for the 4 year example given, year 2 expense would be 27%, year 3 expense 15%, and year 4 expense would be 6%.
As you see it can get a little complicated, with the calculations based on the vesting schedule."
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My first reaction was to be impressed that IDCC is being aggressive in writing off the cost of RSU grants while a lot of firms are still waffling on taking any kind of charges for their incentive grants. Looks like a trade off of taking a bigger hit on something now so we can soar with less to write off later. Good deal, right?
Then the same question hit me, i.e., 52%, 27%, 15%, and then just 6% of what number will get charged to RSU expense over the next 3 years??? Be great if using the market valuation on "date of grant" of those RSU's was ok with the powers that be, but somehow that does not pass my "smell" test when these RSUs have a 4 year vesting period. What about the speculative value over those 4 years? Is it ok to expense RSU share grants that do not vest until several years from now using only today's market value?
The current valuations of IDCC LEAPS indicate some value over time. Where does that time value get priced into the expense write off of RSU's vesting over 4 years? Does the accelerated amortization accounting procedure for RSU's require usage of the actual "market value" on each annual vesting date,... or does it allow firms to use the "market value" on date of grant over the entire 4 year vesting period?
Either way, IMO it looks mighty bullish to see IDCC granting and taking accelerated write-offs on RSU incentive compensation grants early this year. Some like to talk about wanting to see more "shareholder alignment" at IDCC. Well, having the horses pulling our IDCC wagon holding RSU grants that vest over the next 4 years does that just fine from where this investor is observing.
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