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Financial statements filed with the SEC must follow the guidance in ASR 268, which requires certain awards to be classified as temporary equity. This guidance applies if redemption of the award (or underlying shares) is outside of the control of the issuer. This could include awards such as:
• Shares that are redeemable at the employee’s discretion after a six-month holding period, or based on contingent events
• Options with underlying shares that are redeemable at the employee’s discretion after a six-month holding period, or based on contingent events
• Options with cash settlement features based on contingent events
For information on accounting for awards classified as temporary equity, see SC 3.3.10. FSP 5.6.3 discusses presentation and disclosure requirements associated with temporary equity.
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