How are RSUs accounted for and how do they differ from stock options?

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AcadiFi · Accepted Answer

Restricted Stock Units (RSUs) are promises to deliver shares (or cash equivalent) upon vesting. Unlike stock options, RSUs have intrinsic value on day one equal to the full share price — there's no exercise price to subtract. Grant-date fair value = current share price × number of RSUs. No Black-Scholes needed because there's no optionality. If Paloma Analytics grants 15,000 RSUs when shares trade at $42, the total grant-date fair value is $630,000, expensed over the 4-year service period at $157,500/year. Key accounting points: 1. No valuation model required — use spot price. 2. Forfeitures: must estimate and adjust, or account as they occur (US GAAP election under ASU 2016-09). 3. Dividends paid on unvested RSUs are typically treated as compensation if forfeitable, or as distributions if non-forfeitable. Diluted EPS impact: RSUs use the TREASURY STOCK METHOD, but the proceeds are limited to the average unrecognized compensation expense (not exercise proceeds, since there are none). This means RSUs nearly always dilute more per unit than equivalent options. ```mermaid flowchart LR A[RSU Grant] --> B[Expense over
service period] B --> C[Vesting] C --> D[Issue shares] D --> E[Diluted EPS
treasury stock] ``` Strategic insight: RSUs are increasingly preferred because employees receive value even if the stock flatlines, whereas out-of-the-money options feel worthless. Expense is also more predictable for management guidance.

How are RSUs accounted for and how do they differ from stock options?

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