FAR 31.205-6(i) - Stock Options, Stock Appreciation Rights, and Phantom Stock Plans.
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== Stock Options, Stock Appreciation Rights and Phantom Stock Plans
Contents |
Allowable or Unallowable?
Unallowable
However, in Rare instances, Allowable under APB 25 rules.
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. Also see CAS 415 - Accounting for the Costs of Deferred Compensation
References and Notes
Additional Resources and Links
Contributors
Name, Title, and Organization
Major
Marshall Haney, Director USG Compliance,
