Accelerated Vesting

What is ‘Accelerated Vesting’

A form of vesting that takes place at a faster rate than the initial vesting schedule in a company’s stock option plan. This allows the option holder to receive the monetary benefit from the option much sooner. If a company decides to undertake accelerated vesting, then it may expense the costs associated with the stock options sooner.

Explaining ‘Accelerated Vesting’

Prior to the adoption of FAS-123(R), U.S. companies were not required to account for stock option compensation paid to employees and executives. As a result of FAS-123(R), companies were required to account for stock option expenses, which amounted to a large expense for many companies. By adopting an accelerated vesting program, companies can expense their vesting costs over a longer period of time, which makes their future incomes higher than they would be if the options were vested on schedule.

Further Reading

  • Accelerated vesting of employee stock options in anticipation of FAS 123‐R – [PDF]
  • Stock option grant vesting terms: Economic and financial reporting determinants – [PDF]
  • Stock and option grants with performance-based vesting provisions – [PDF]
  • Managerial short-termism and investment: Evidence from accelerated option vesting – [PDF]
  • Option acceleration in response to SFAS No. 123 (R) – [PDF]
  • The structure of performance-vested stock option grants – [PDF]
  • The retention effects of unvested equity: Evidence from accelerated option vesting – [PDF]
  • Stock option vesting conditions, CEO turnover, and myopic investment – [PDF]
  • Compensation Contract Adjustments and the Economic Consequences of Financial Reporting in Response to FAS 123R: Accelerated Vesting of Employee Stock … – [PDF]