ESOP not Exercised by Employee after vesting
1. Company has granted ESOP to few employees & one director in Aug. 2010.
2. All shares was vested in Aug 2014.
3. all Employees exercised ESOP.
4. but director did not exercised ESOP because at the time of Exercise, his exercise price (900) was greater than fare value of share (600).
5. maximum Exercise period of ESOP was 7 years from Grant date, that end on Aug 2017.
6. But In May 16, director has given request to the company to cancel his ESOP.
7. Pls suggest us how to account for it.
Dear Sir,In the present case, the amount standing in ESOP Outstanding account in respect to such unexercised options, should be credited to General Reserve account. (Entry would be ESOP Outstanding Account Debit, General Reserve/ Reserve and Surplus Account Credit). Reference has been derived from Guidance noteOn exercise of the right to obtain shares or stock options, the enterprise issues shares on receipt of the exercise price. The shares so issued should be considered to have been issued at the consideration comprising the exercise price and the corresponding amount standing to the credit of the relevant equity account (e.g., Stock Options Outstanding Account). In a situation where the right to obtain shares or stock option expires unexercised, the balance standing to the credit of the relevant equity account should be transferred to general reserve.