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French to English: Financial / Accounting Policy

French source text

English translation
The Private Standards Committee of the French CNC (Conseil National de la Comptabilité – French Accounting Standards Board) recently issued an opinion regarding the accounting treatment in French separate financial statements of grants to employees of restricted stock units.

It should be recalled that at present no legislation exists and that practices vary widely. So in respect of X, Y decided to record a contingency reserve at the end of 2007 for the full amount of the likely liability, namely the stock market purchase price of the shares already bought by Z x the turnover rate at the end of the two-year vesting period x the number of employee beneficiaries concerned at the end of 2007. This is not the policy applied by Z for its own employees nor by the GCE for its, recording a contingency reserve for the same amount but deferring it pro-rata over the two years.

It is at present the mixed approach that is preferred by the CNC and we hereby recall the key accounting principles:

  • no liability where new shares to be issued will be delivered to employees since no cash will flow out of the company;
  • the existence of a liability where existing shares will be delivered since cash is expended by the company and the date of recognition of the liability is the date on which it is decided to grant the existing shares;
  • the recognition of this liability on a deferred basis by equating the grant of restricted stock units to a form of compensation. In the event that the vesting of the shares is not subject to a requirement to remain with the company during the vesting period, no deferral is carried out;
  • calculation of the liability on the basis of the effective purchase price (or likely if the purchase is not yet made) of the shares, the number of beneficiaries concerned, the retention rate and the pro-rata deferral;

© T Leary 2020

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