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RSUs are generally always worth something versus stock options, which can expire worthless if the stock price is below the strike price. Additionally, with RSUs you don't have to come up with the cash to exercise the options if your company doesn't offer some sort of cashless exercise option.
When you receive an RSU, you don't have any immediate tax liability. You only have to pay taxes when your RSU vests and you receive an actual payout of stock shares. At that point, you have to report income based on the fair market value of the stock.
A Restricted Stock Plan is a common way to share stock with employees in public companies.Customarily, restricted stock will carry a vesting schedule so that employees will forfeit some or all of the shares unless they remain with the company for a specified number of years (e.g. 3 or 4).
The details of RSU accounting are beyond the scope of this brief discussion, but, in general, RSUs that can be settled only in shares receive accounting treatment similar to restricted stock. The fair value of the award, based on the stock price at the time of the grant, is expensed over the service period.
Stock options are only valuable if the market value of the stock is higher than the grant price at some point in the vesting period. Otherwise, you're paying more for the shares than you could in theory sell them for. RSUs, meanwhile, are pure gain, as you don't have to pay for them.
So that's the basic accounting for restricted stock under GAAP. The key takeaways are:The value recognized for each restricted share is the same as its current share price (for non-dividend paying stock). Restricted stock is recognized on the income statement over the service period.
Restricted shares are shares that are already included in the number of outstanding shares.Typically, these shares are owned by insiders such as employees and initial investors.
Fulfill the SEC holding period requirements. From the date the shares are fully paid for, you must hold them at least six months. Comply with federal reporting requirements. Check trading volume. Remove the stock legend. Conduct an ordinary brokerage transaction. File required notices with the SEC.
The relevant considerations are whether you should keep the shares and, if not, when to sell them. In the majority of cases, it's best to sell your vested RSU shares as you receive them and add the proceeds to your well-diversified investment portfolio.