Fair Value of Stock Options (ESOP, ESPS, SAR)

For ESOP Accounting, we typically requires two valuations:

Company’s share price
Fair Value of option

Date of Valuation will depend on type of Stock options:

Equity-settled plan – Grant date fair value
Cash-settled plan – Grant date and each balance sheet date

Fair Value of option can be determined using following methods:

Black- Scholes model
Binomial/Lattice model
Monte- Carlo simulation model

We provide ESOP valuation based on all above methods as applicable based on scheme of company. Amongst the three methods of Fair value of ESOP, Black- Scholes model is a widely used method by Indian listed and non-listed companies.

We also arrange to provide Company’s share price valuation from Registered Valuer, Merchant Banker as required.

ESOP Scheme Design and Implementation

Understanding key Requirement of stakeholders

Providing Different 2-4 options of ESOP Scheme

Cost Benefit analysis under schemes

Management Approval from Scheme structure

ESOP Scheme

ESOP Scheme Design as per regulatory requirement

Special Resolution, Stock Exchnage in-principle approval (listed company)

Grant Letter and Grant of Optipns

ESOP Accounting Expense as per applicable AS

In Cost-Benefit analysis, accounting expenses for projected years and future cash flows from employees perspectives will be calculated based on the expected target benefit to be given to individual members (ignoring Individual Taxes).