What is the vesting date in relation to share-based compensation?

The vesting date in relation to share-based compensation is the date when all vesting conditions have been met. This is significant because it marks the point at which the employee earns the right to the shares or options granted to them under the share-based compensation plan. Until the vesting date is reached, the employee does not have a non-forfeitable right to these compensation benefits, meaning they could still lose them if they leave the company or fail to meet certain conditions.

Understanding the vesting date is crucial for both accounting and tax purposes. Corporations need to recognize compensation expenses in their financial statements at the time employees earn the right to their awards, thereby aligning with the accrual accounting principles. Additionally, from a tax perspective, the vesting date is important because it is often the point at which tax implications arise for the employee who has been granted the share-based compensation.

Other aspects related to share-based compensation, such as the date shares are sold, when vesting conditions are set, or when options are exercised, play important roles in the overall process but do not define the vesting date itself. The vesting date is specifically tied to meeting all the predetermined conditions required for the employee to obtain their shares.