The Stock Options Book-18Th Edition (Formerly 17Th Edition)

2017 Edits to CEPI Textbooks

For exam candidates that want to transfer notes from the 2016 versions of the CEPI textbooks to the 2017 versions of the CEPI textbooks, here is a listing of the sections that were materially changed in the 2017 versions.[1]

The Stock Options Book-18th edition (formerly 17th edition)

Chapter 1 – The Basics of Stock Options (NO SUBSTANTIVE CHANGES)

Chapter 2 – Tax Treatment of Nonstatutory Stock Options

· 2.3 Application of Section 83 of the Code (paragraph 4, regulatory update)

· 2.4 Section 83(b) Election (paragraph 5 and fn 7, regulatory update)

Chapter 3 – Tax Treatment of Incentive Stock Options (NO SUBSTANTIVE CHANGES)

Chapter 4 – Plan Design and Administration

· 4.3.2.1 Shareholder Approval of Plans (Material Modification paragraph, new information, and new fn 70)

Chapter 5 – Employee Stock Purchase Plans (NO CHANGES)

Chapter 6 – Trends in Equity Compensation: An Overview

· 6.1.2 Clawbacks (regulatory update and substantive narrative update, delete old fn 6 and added two new fn, now 6 and 7)

Chapter 7 – Financing the Purchase of Stock Options (NO CHANGES)

Chapter 8 – Overview of Securities Law Issues (NO CHANGES)

Chapter 9 – Tax Law Compliance Issues

· 9.4 Procedure for Withholding with Stock (regulatory update, new fn 12)

· 9.5 Internal Revenue Code Section 409A (narrative update, last paragraph)

· 9.5.1 General Application (regulatory update, paragraph 2)

· 9.5.2 Specific Application of the Rules to Equity Awards (narrative update, new fn 14)

· 9.5.4 Restricted Stock and RSUs (title change and new fn 16)

· 9.6 Limit on Deductions: $1 Million Cap (Code Section 162(m)) (narrative update, paragraph 6 and fn 20)

Chapter 10 - Basic Accounting Issues (NO SUBSTANTIVE CHANGES)

· Introduction (regulatory update discussion and narrative changes)

· 10.1 Fair Value and Measurement Date (narrative update, paragraphs 3 and 4, Exhibit 10-1 Cash-settled SARs)

· 10.2 Option-Pricing Models (narrative update, paragraph 2 expected term and risk-free interest rate sections, Exhibit 10-2 Volatility)

· 10.3 Definition of Employee (narrative update)

· 10.4 Recognition of Expense and Application of Estimated Forfeiture Rate (regulatory and narrative update)

· 10.6 Tax Accounting (regulatory and narrative update)

· 10.7 Earnings Per Share: Diluted and Basic (regulatory and narrative update)

Chapter 11 – Tax Treatment of Options on Death and Divorce

· 11.1 Death (narrative update last paragraph)

Chapter 12 – Post-Termination Option Issues (NO CHANGES)

Chapter 13 - Legislative and Regulatory Initiatives Related to Stock Options: History and Status (NO CHANGES)

Chapter 14 – Cases Affecting Equity Compensation (NO CHANGES)

Chapter 15 – Transferable Options

Chapter 16 – Reloads, Evergreens, Repricings, and Exchanges (NO SUBSTANTIVE CHANGES)

Appendix 1: Designing a Broad-based Stock Option Plan

· new information in sections:

Publicly Traded Companies

Secondary Markets and Outside Investors

· narrative changes in sections:

What Kinds of Equity?

Who Is Eligible and Who Will Actually Get Equity?

Securities Law Issues

Glossary

Equity Alternatives-15th edition (formerly 14th edition)

Chapter 1 – Basic Issues in Plan Design

· 1.5.1 How Much of Your Company’s Equity or Equity Value Will You Share? (narrative update last paragraph)

· 1.5.2 Liquidity (narrative update new paragraph 2, changes to bullet items - Internal market, Outside investors, and Secondary markets)

· 1.5.6 Key Issues in Thinking About Eligibility (narrative change to numbered item 3. Merit)

Chapter 2 – Phantom Stock and Stock Appreciation Rights

· Introductory text (narrative updates throughout)

· 2.1.1 Stock Appreciation Rights (SARs) (minor narrative changes throughout, new fn 5)

· 2.2.1 Key Employee Program vs. Broad-Based Program (substantive narrative changes, paragraph 1, new fn 7)

· 2.2.3 Public vs. Private Companies (substantive narrative changes throughout)

· 2.3.4 Exercise and Payout Events (nonmaterial narrative changes)

· 2.3.5 Payout Amounts (nonmaterial narrative changes)

· 2.3.6 Vesting (nonmaterial narrative changes)

· 2.3.7 Acceleration of Vesting (nonmaterial narrative changes)

· 2.3.10 Dividend Equivalents (substantive changes to fn 17)

· 2.4 Stock-Settled SARs (nonmaterial narrative changes)

· 2.5 Taxation of SARs and Phantom Stock

· 2.6 ERISA Coverage (substantive changes to fn 32)

Chapter 3 – Restricted Stock Awards, Units, and Purchases

· 3.1.1 Advantages Distinct to Restricted Stock Issued at No Cost (nonmaterial narrative changes, paragraph 1)

· 3.3 Restricted Stock Plan Design (nonmaterial narrative changes, paragraph 2)

· 3.3.5 Vesting (material narrative changes)

· 3.3.6 Termination of Employment (nonmaterial narrative changes, paragraph 4 and fn 1 & 2)

· 3.3.7 Additional Restrictions (new paragraph 5)

· 3.3.9 Methods of Tax Payment (material narrative changes, paragraph 3, and new fn 3)

· 3.4.1.1 Deferral Elections for Restricted Stock Units (substantive narrative additions)

· 3.4.3 Employee Tax Withholding (substantive narrative additions, regulatory update)

· 3.4.7 Tax Treatment of Employer company (nonmaterial narrative changes)

· 3.6 Financial Statement Impact (substantive narrative additions, regulatory update, new fn 5)

· 3.6.1 Disclosure (new bullet item 8)

· 3.6.2 Accounting for Tax Effects (regulatory update, substantive narrative changes, paragraphs 2, 4, 5, new fn 6, last paragraph deleted)

· 3.6.3 Accounting for Dividend Payments (nonmaterial narrative changes)

· 3.6.3.1 Accounting for Tax Effects of Dividend Payments (material narrative changes, new fn 7)

· 3.6.4 A Bit of Accounting History (section deleted)

· 3.8.2 Restricted Stock Agreement (numeric statistics updated last paragraph)

· 3.8.6 Filing of Section 83(b) Election (regulatory update)

· 3.8.7 Withholding Taxes (narrative updates)

· 3.8.7.1 Withholding Shares to Cover Taxes (title change, regulatory update, substantive narrative changes, new fn 16)

Chapter 4 – Performance Award Plans

· 4.9.3 Income Deferral and Section 409A (substantive update to item 1.a.)

Chapter 5 – Direct Stock Purchases in Closely Held Companies (NO CHANGES)

Chapter 6 – Accounting Issues

· 6.2 Equity Awards vs. Liability Awards (When Compensation is Measured) (substantive changes throughout)

· 6.2.1 Employee Awards Classified as Equity (new section)

· 6.2.2 Employee Awards Classified as Liabilities (new section)

· 6.2.3 Non-Employee Awards (new section)

· 6.4.3 Forfeitures (new section)

· 6.6 Impact of Equity-Based Compensation on Earnings per Share (regulatory updates in last two paragraphs and Table 6-13)

· 6.6.7.1 Liability Awards vs. Equity Awards (narrative update, paragraphs 1 and 3, new last paragraph)

Chapter 7 – ESOPs, ESPPs, 401(k) Plans, and Stock Options: When the Old Standbys Still Make Sense (NO SUBSTANTIVE CHANGES)

Chapter 8 – A Tiered Approach to Equity Design with Multiple Equity Compensation Vehicles (NO SUBSTANTIVE CHANGES)

Selected Issues in Equity Compensation-14th edition (formerly 13th edition)

Chapter 1 – Administering an Employee Stock Option Plan

· 1.2.4 Internal Approval Process (substantive new narrative, last two paragraphs)

· 1.2.8 Term (substantive new narrative)

· 1.3.2 Special Provision for Privately Held Companies (new section – subsequent sections renumbered)

· 1.3.12 Section 6039 Reporting to the IRS (formerly 1.3.11, material clarification, last paragraph)

Chapter 2 – Federal Securities Law Considerations for Equity Compensation Plans

· 2.1.3 Options as Equity Securities (material clarification)

· 2.3 Six-Month “Short-Swing” Profit Recapture Under Section 16(b) of the 1934 Act (removal of citation, sixth paragraph)

· 2.5.1 Registration Requirements (substantive changes, Regulation D Offerings)

· Appendix C: Reporting Procedures for Common Stock Plan Transactions (material clarification in RSU/phantom stock section)

Chapter 3 – State Securities Law Considerations for Equity Compensation Plans (NO SUBSTANTIVE CHANGES)

Chapter 4 – Preparing for an Initial Public Offering

· 4.2.3 Adoption of Directors’ Stock Plan (substantive change, second paragraph)

· 4.3.3.2 Compensation Committee (new section – subsequent sections renumbered)

Chapter 5 – Handling Death Under an Equity Compensation Plan (NO SUBSTANTIVE CHANGES)

Chapter 6 – Evergreen Provisions for Stock Plans (NO SUBSTANTIVE CHANGES)

Chapter 7 – Repricing Underwater Stock Options (NO SUBSTANTIVE CHANGES)

Chapter 8 – Equity Awards in Divorce (NO SUBSTANTIVE CHANGES)

Chapter 9 – Designing and Implementing an Employee Stock Purchase Plan

· 9.6.9 A Bit of Accounting History (deleted)

Chapter 10 – The Role of the Transfer Agent (NO SUBSTANTIVE CHANGES)

Chapter 11 – Annual Meetings (NO SUBSTANTIVE CHANGES)

Chapter 12 – Plan Design and Communication Issues (NO SUBSTANTIVE CHANGES)

Glossary - FINRA, Form 10-K, Form 10-Q, Mark to Market (deleted), Modification (material changes)

Accounting for Equity Compensation-14th edition (formerly 13th edition)

Chapter 1 – Introduction: How Did We Get Here?

· Introductory text (substantive new narrative, last paragraph)

· 1.1 Looking Ahead (substantive changes, first two paragraphs)

· 1.1.1 IFRS 2

Chapter 2 – Overview of the Standard (NO CHANGES)

Chapter 3 – Measurement Date

· Introductory text (substantive new narrative, penultimate paragraph)

· 3.1 Grants to Nonemployees (regulatory update, last two paragraphs)

· 3.3 Changes in Employment Status (regulatory update, new last paragraph)

· 3.4.2 Repurchase Obligations (regulatory update, last paragraph deleted)

· 3.4.3 Options Exercisable for an Extended Period After Termination of Employment (section deleted – subsequent sections renumbered)

· 3.4.4 Other Circumstances That Trigger Liability Treatment (section deleted – subsequent sections renumbered)

Chapter 4 – Measurement of Expense

· Introductory text (substantive changes)

· 4.1 Valuation of Stock Options and Stock-Settled SARs (substantive new narrative, paragraphs 2 & 3)

· 4.2 Option-Pricing Models (substantive changes, paragraph 12)

· 4.5 Valuation of Full-Value Awards (new section)

· 4.6 Other Conditions That Affect Fair Value (new section)

· 4.6.1 Market Conditions (new section)

· 4.6.2 Post-Vesting Sale Restrictions (new section)

Chapter 5 – Expense Attribution

· 5.1.1 Start of the Service Period (Key Comparison to IFRS 2 inset)

· 5.1.2 Grants to Newly Hired Employees (new section)

· 5.2 Forfeitures (substantive changes, entire section)

· 5.2.1 Estimating Forfeitures (substantive changes, entire section)

· 5.2.4 Attribution of Expense for Performance-Based Awards (new section – subsequent sections renumbered)

Chapter 6 – Accounting for Tax Effects

· 6.1 Nonqualified Arrangements (substantive changes, entire section)

· 6.2 Tax-Qualified Arrangements (substantive changes, entire section)

· 6.2.1 Nonqualified ESPPs (new section)

Chapter 7 – Financing Exercise Transactions and Tax Withholding

· 7.2 Stock-for-Stock, Net, and Pyramid Exercises (deleted paragraph 2)

· 7.3 Using Stock to Cover Tax Payments (regulatory update, entire section)

Chapter 8 – Modifications

· Introductory text (regulatory update, new fn 1)

· 8.3 Cash Settlement or Cancellation for No consideration (new last paragraph)

Chapter 9 – Business Combinations (NO SUBSTANTIVE CHANGES)

Chapter 10 – Earnings Per Share

· 10.1 Weighting Options and Awards Outstanding (new section – subsequent sections renumbered)

· 10.1.1 Tax Savings (section deleted – subsequent sections renumbered)

· 10.2 Transaction Proceeds (second bullet item deleted)

· 10.2.2 Unamortized Expense (material changes to example in last two sentences of last paragraph)

· 10.4 Restricted Stock (substantive changes)

· 10.5 Basic Earnings per Share (new last paragraph)

Chapter 11 – Employee Stock Purchase Plans (NO CHANGES)

Chapter 12 – Stock Appreciation Rights

· Introductory text (substantive change, paragraphs 1 and 6)

· 12.1 Earnings per Share Considerations (regulatory update, first paragraph)

Chapter 13 – Private Companies

· 13.1 Fair Value Considerations (regulatory update)

Chapter 14 – Disclosures (first bullet list has new last item)

Chapter 15 – Effective Date and Transition Methods (NO CHANGES)

Chapter 16 – Examples (all examples updated to reflect regulatory updates in ASU 2016-09)

Advanced Topics in Equity Compensation Accounting-7th edition (formerly 6th edition)

Chapter 1 – Valuation Models (NO CHANGES)

Chapter 2 – Expected Term (NO CHANGES)

Chapter 3 – Volatility Estimation (NO CHANGES)

Chapter 4 – Expense Recognition for Market, Performance, and Service Conditions

· Introductory text (substantive change, paragraphs 1 and 5)

· 4.1 Earnings per Share Considerations (substantive changes)

· 4.1.1 Requisite Service Period (non-material changes)

· 4.1.2 Service Condition (material change, last paragraph)

· 4.1.3 Performance Condition (substantive changes)

· 4.1.4 Market Condition (substantive changes)

· 4.1.5 Grant Date (substantive changes, paragraph 3)

· 4.1.6 Service Inception Date (substantive changes, last 2 paragraphs)

· 4.2.1 Factors Affected by Performance and Market Conditions (substantive changes, Timing of Vesting section)

· 4.2.1 Factors Affected by Performance and Market Conditions (non-material changes, Quantity of Instruments Vesting section)

· 4.2.1 Factors Affected by Performance and Market Conditions (non-material changes, Per-Share Fair Value section)

· 4.2.2 Grant Date Considerations (non-material changes)

· 4.2.4 Interdependence and Timing of Performance and Market Conditions (material changes, paragraphs 11 & 12)

· 4.3.1 Recognition Objectives of ASC 718 (regulatory update)

· 4.3.2 Unique Characteristics of Performance Conditions (non-material changes)

· 4.3.3 Timing of Vesting (non-material changes)

· 4.3.4 Quantity of Instruments Vesting (non-material changes, last paragraph)

· 4.4.1 Unique Characteristics of Market Conditions (material changes, first paragraph)

· 4.4.2 Timing of Vesting (non-material changes)

· 4.4.3 Quantity of Instruments Vesting (non-material changes)

· 4.3.4 Quantity of Instruments Vesting (non-material changes, last paragraph)

· 4.6 Emerging Issues with Special Performance Metrics (regulatory citations updated)

· 4.7 Closing Comments (non-material changes)

Chapter 5 – Making Sense of Forfeiture Rates

· Introductory text (substantive changes)

· 5.1 Why a Forfeiture Rate? (substantive changes)

· 5.2.3 Banding by Group (material change, penultimate paragraph)

· 5.2.4 General Forfeiture Rate Modeling Considerations (material changes, paragraph 1)

Chapter 6 – Modification Accounting

· Introductory text (substantive changes)

· 6.2.1 An Economic Exchange (non-material changes)

· 6.2.3 Fitting the Economic Theory into the Accounting Framework (substantive changes)

· 6.3.1 The Four Types of Vesting Probability Impact (substantive changes, clarifying sub-sub-headings added 6.3.1.1 through 6.3.1.4)

· 6.3.2.1 Equity to Liability Modification (non-material changes)

· 6.4 Valuation Theory and Practice (regulatory citation update paragraph 1, other non-material changes)

· 6.5 Accounting Theory (non-material changes)

· 6.5.1 How Much and When (substantive changes)

Chapter 7 – IFRS 2: Today and Tomorrow

· Table 7-1 (material changes)

· 7.3.2 Valuation (material changes)

· 7.3.3.1 Basic Liability Criteria Differences (regulatory update)

· 7.3.6 Deferred Tax Accounting (regulatory update)

· 7.4.2 Long-Term Strategies (material changes)

Chapter 8 – Design Features Driving the Fair Value of a Relative TSR Award (NO CHANGES)

Chapter 9 – Accounting for Assumed Awards Under ASC 805

· 9.4.2 Forfeiture Rate Considerations (regulatory update)

· 9.4.4 Income Tax Accounting Considerations (regulatory update)

· 9.4.5 Earnings per Share Considerations (regulatory update)

· 9.6 Overview on Prior Guidance in FAS 141 (section deleted, subsequent sections renumbered)

Chapter 10 – FASB’s Upcoming Revisions to ASC 718 Under ASU 2016-09

· Introductory text (substantive changes)

· 10.1 APIC Pool (regulatory update)

· 10.2 Realization Requirement (regulatory update)

· 10.3 Excess Benefit Disclosure (regulatory update)

· 10.4 Forfeiture Rates (regulatory update)

· 10.5 Statutory Withholding Rates (regulatory update)

· 10.6 Withholding Taxes Disclosure (regulatory update)

· 10.8 Repurchase Features (regulatory update)

· 10.10 Removal of Indefinite Deferral (regulatory update)

· 10.11 Wrap-Up (regulatory update)

1

[1] Chapter headings in this document are referential only; the bulleted list indicates sections that have been changed. The changes are more than simple typo and grammatical corrections. Page numbers may have changed in all publications, so be sure to update any page number references in any notes from prior study seasons.