SEC Staff Issues Accounting Guidance on "Spring-Loaded" Compensation Awards to Executives

Securities and Exchange Commission staff today released guidance for companies about how to properly recognize and disclose compensation cost for "spring-loaded awards" made to executives. Spring-loaded awards are share-based compensation arrangements where a company grants stock options or other awards shortly before it announces market-moving information such as an earnings release with better-than-expected results or the disclosure of a significant transaction. According to Staff Accounting Bulletin (SAB) No. 120 prepared by the SEC's Office of the Chief Accountant and the Division of Corporation Finance, non-routine spring-loaded grants merit particular scrutiny by those responsible for compensation and financial reporting governance at public companies.