Compensation

Types	Examples
Short-term benefits	• Salaries, annual bonuses • Medical care, Contributions to social security schemes
Long-term benefits	• Long-term paid leave • Long-term disability benefits
Termination benefits	• Severance • Counseling and outplacement services
Share-based compensation	• Restricted stock unit • Stock options
Post-employment benefits	• Pension payments to retirees • Retiree life insurance and medical care

Share based compensation

Restricted Stock Unit

Cost depending on grant date (beginning)

B/S

At beginning: Nothiong

At time 1: Retained earning $\downarrow$. Recognize Share-baed compensation reserve increase.

At time 2: RE down, SBCR up

At time 3 RE down, SBCR up

At Vesting/Settlement: SBCR clear, Capital increase

I/S

At beginning (0-1): amortized share-based compensation expense

• To COGS or SG&A, depending on receiver

At (1-2): amortized share-based compensation expense

At(2-3): amortized share-based compensation expense

C/F

Nothing to state.

Stock Option Accounting Treatment

Factor	Change	Value of Call Option
Volatility (σ)	Increase ↑	Increase ↑
Risk-free rate (Rₓ)	Increase ↑	Increase ↑
Time to expiration (T)	Increase ↑	Increase ↑
Dividend yield	Increase ↑	Decrease ↓

B/S

At time 0: RE down. SBCR up

At time 1: RE down SBCR up

At vesting: RE down SBCR up

At settlement: SBCR down Capital up

• From the receiver exercise: Cash up, Capital up

I/S

At (0-1): amortized share-based compensation expense (SBCE)

At (1-2): amortized share-based compensation expense (SBCE)

At vesting: Nothing

At settlement: Nothing

C/F

At settlement: Cash (CFF) from exercise

Tax Treeatment

Condition	IFRS	US GAAP
RSUs: Share price on settlement date > grant date	Excess tax benefit / Tax windfall B/S: Equity +	I/S: Income tax expense – Equity +
Options: Intrinsic value at exercise > grant-date fair value	Excess tax benefit / Tax windfall B/S: Equity +	I/S: Income tax expense –
RSUs: Share price on settlement date < grant date	Tax shortfall B/S: Equity –	I/S: Income tax expense +
Options: Intrinsic value at exercise < grant-date fair value	Tax shortfall B/S: Equity –	I/S: Income tax expense +

Diluted Shares

$$\text{Diluted Shares}=\text{Basiac Shares}+\text{Unvested Shares}-\frac{\text{Assumed Proceeds}}{\text{Avg Share Price}}$$

Assumed proceed:

• RSUs: Unrecognized share based compensation (beg+end)/2
• Option: Unrecognized share based compensation (beg+end)/2 + exercise value (price$\times$ amount)

Modelling

Forecast COGS and SGA based on % of Rev.

Valuation considering

• Use diluted shares for outstanding but unvested share-based awards (SBA)
• Dilution from future SBA: Deduct share-based expense from FCFF (view as cash cost)

Post-Empolyment Compensation 养老金

Fund Status = PA - PBO

PPC Classification

Generally we consider negative fund status (PA < PBO)

Then we let Net_PBO + PBO - PA = Net_PBO + I-AG+S-AR-C = Net_PBO_End

Note I-AG+S-AR as Total periodic Pension Cost (TPPC)