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What are the entries for Restricted Stock Units (RSUs) net issuance vs. sell-to-cover?

2 relatively similar methods to withhold Federal & State taxes on the vesting & delivery of Restricted Stock Units (RSUs) are Net Issuance & Sell-to-Cover

Based on the following assumptions:  100 shares vested & delivered; the fair market value on the delivery date $50; and the tax Federal & State withholding is 40%:

1. Net Issuance. Companys withholds 40 shares, which provides 60 shares [100 * (1 – 40%)] and no cash to the recipient.

2. Sell-to-Cover. Company sells 40 shares, which provides 60 shares [100 * (1 – 40%)] and no cash to the recipient.

What are the respective entries the Company should book for each of the methods above?

Answers

(Agent, JKS Solutions, Inc.) |

I authored a 30 page accounting guide for my last employer who issued and redeemed stock options under their Share Based Compensation plan.

It might be helpful to know what type of plan you are administrating, there are so many.

Anonymous
(Controller) |

Assuming a par value of $1, I would record the net settlement (#1) as follows:

APIC dr 2,060
Common Stk (60 shs times $1) cr 60
Payroll Taxes Payable ($5K gross comp times tax rate) cr 2,000

Anyone else agree?

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