FAR 31.205-6(i) - Stock Options, Stock Appreciation Rights, and Phantom Stock Plans.

From Knowledge base
Jump to: navigation, search

Allowable or Unallowable:

Source: "CAS" is not in the list of possible values (Other, FAR, DFAR) for this property., FAR

Contents

Stock Options, Stock Appreciation Rights and Phantom Stock Plans

Allowable or Unallowable?

Unallowable

However, in Rare instances, Allowable under Accounting Principles Board (APB) 25 rules. See APB 25 - Accounting for Stock Issued to Employees

FAR 31.205-6(i) Citation[1]

  • (i) Compensation based on changes in the prices of corporate securities or corporate security ownership, such as stock options, stock appreciation rights, phantom stock plans, and junior stock conversions.
    • (1) Any compensation which is calculated, or valued, based on changes in the price of corporate securities is unallowable.
    • (2) Any compensation represented by dividend payments or which is calculated based on dividend payments is unallowable.
    • (3) If a contractor pays an employee in lieu of the employee receiving or exercising a right, option, or benefit which would have been unallowable under this paragraph (i), such payments are also unallowable.

Summary

Stock options and similar securities are unallowable if the compensation is based on the changes in the price of the security. Because this form of compensation is unallowable, and the US Government will not reimburse a contractor for these costs, most US Government contractors do not use these instruments to compensate their employees. In rare cases, in which the exercise price is less than the market price, a portion of stock options may be allowable, under APB 25. It is rare, because is such cases, this situation creates tax consequences for the receipiants of the stock options. Also see CAS 415 - Accounting for the Costs of Deferred Compensation

References and Notes

  1. ↑ https://acquisition.gov/far/currenthtmlSubpart%2031_2.html#wp1095552

Resources and Links

Internal

External

List of APB Opinions - Wikipedia has very good table listing each opinions with full text. The web page is: http://en.wikipedia.org/wiki/List_of_APB_Opinions

Contributors

Name, Title, and Organization

Major

Minor

Retrieved from "http://www.govcwiki.org/index.php?title=FAR_31.205-6(i)_-_Stock_Options,_Stock_Appreciation_Rights,_and_Phantom_Stock_Plans.&oldid=10347"