Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:

When does the "vesting date" occur in an ESOP?

Options:

It is the date when the company grants stock options to employees

It is the date when employees exercise their stock options

It is the date when employees become entitled to apply for shares based on satisfying vesting conditions

It is the date when the company's shares are offered to the public

Correct Answer:

It is the date when employees become entitled to apply for shares based on satisfying vesting conditions

Explanation:

The correct answer is option 3- It is the date when employees become entitled to apply for shares based on satisfying vesting conditions.

The "vesting date" in an Employees Stock Option Plan (ESOP) is the date on which employees become eligible to apply for and acquire shares based on having fulfilled the predetermined vesting conditions. Vesting conditions are typically established by the company and often involve requirements such as a certain period of continuous employment or the achievement of specific performance targets. Until the vesting conditions are met, employees do not have the full right to exercise their stock options and acquire shares. Once the vesting date arrives and the conditions are satisfied, employees gain the entitlement to apply for shares and exercise their options by purchasing shares at the predetermined exercise price.