Definitions of US GAAP Terms

Additional paid-in capital: Amounts received at issuance in excess of the par or stated value of capital stock and amounts received from other transactions involving the entity's stock and/or stockholders. It is classified by source.
Allocated shares: ESOP shares assigned to individual participants. These shares are usually based on length of service, compensation, or a combination of both.
Appropriation (of retained earnings): A segregation of retained earnings to communicate the unavailability of a portion for dividend distributions.
Authorized shares: The maximum number of shares permitted to be issued by a corporation's charter and bylaws.
Callable: An optional characteristic of preferred stock allowing the corporation to redeem the stock at specified future dates and at specific prices. The call price is usually at or above the original issuance price.
Cliff vesting: A condition of an option or other stock award plan which provides that the employee becomes fully vested at a single point in time.
Combination plans: Compensation plans under which employees receive two or more components, such as options and stock appreciation rights, all of which can be exercised. Thus, each component is actually a separate plan and is accounted for as such.
Committed-to-be-released shares: ESOP shares that will be allocated to employees for service performed currently. They are usually released by payment of debt service.
Compensatory plan: A stock option plan including elements of compensation that are recognized over the service period.
Compensatory stock option plans: Plans that do not meet the criteria for noncompensatory plans. Their main purpose is to provide additional compensation to officers and employees.
Constructive retirement method: Method of accounting for treasury shares that treats the shares as having been retired. The shares revert to authorized but unissued status. The stock and additional paid-in capital accounts are reduced, with a debit to retained earnings or a credit to a paid-in capital account for the excess or deficiency of the purchase cost over or under the original issuance proceeds.
Contributed capital: The amount of equity contributed by the corporation's shareholders. It consists of capital stock plus additional paid-in capital.
Convertible: An optional characteristic of preferred stock allowing the stockholders to exchange their preferred shares for common shares at a specified ratio.
Cost method: Method of accounting for treasury shares that presents aggregate cost of reacquired shares as a deduction from the total of paid-in capital and retained earnings.
Cumulative: An optional characteristic of preferred stock. Any dividends of prior years not paid to the preferred shareholders must be paid before any dividends can be distributed to the common shareholders.
Date of declaration: The date on which the board of directors votes that a dividend be paid. A legal liability (usually current) is created on this date in the case of cash, property, and scrip dividends.
Date of grant: The date on which the board of directors awards the stock to the employees in stock option plans.
Date of payment: The date on which the shareholders are paid the declared dividends.
Date of record: The date on which ownership of the shares is determined. Those owning stock on this date will be paid the declared dividends.
Deficit: A debit balance in the retained earnings account. Dividends may not generally be paid when this condition exists. Formally known as accumulated deficit.
Discount on capital stock: Occurs when the stock of a corporation is originally issued at a price below par value. The original purchasers become contingently liable to creditors for this difference.
Employee stock ownership plan (ESOP): A form of defined contribution employee benefit plan whereby the employer facilitates the purchase of shares of stock in the company for the benefit of the employees, generally by a trust established by the company. The plan may be leveraged by borrowings either from the employer-sponsor or from third-party lenders.
Fixed options: Options that grant the holder the rights to a specified number of shares at fixed prices. It is not dependent on achievement of performance targets.
Graded vesting: A vesting process whereby the employee becomes entitled to a stock-based award fractionally over a period of years.
Issued stock: The number of shares issued by the firm and owned by the shareholders and the corporation. It is the sum of outstanding shares plus treasury shares.
Junior stock: Shares with certain limitations, often as to voting rights, which are granted to employees pursuant to a performance compensation program. Such shares are generally convertible to ordinary shares on achievement of defined goals.
Legal capital: The aggregate par or stated value of stock. It represents the amount of owners' equity that cannot be distributed to shareholders. It serves to protect the claims of the creditors.
Liquidating dividend: A dividend distribution that is not based on earnings. It represents a return of contributed capital.
Measurement date: The date on which the price used to compute compensation under stock-based compensation plans is fixed.
Noncompensatory stock options: Options which, under current GAAP, do not include an element of compensation being paid to the participants. Under proposed GAAP all stock plans would include an element of compensation to be measured and allocated over the service periods of the employees.
Noncompensatory stock option plans: Plans whose primary purpose is widespread ownership of the firm among its employees and officers. They must meet four criteria (see APB 25, para 7, or the section on stock options).
No-par stock: Stock that has no par value. Sometimes a stated value is determined by the board of directors. In this case the stated value is accorded the same treatment as par value stock.
Outstanding stock: Stock issued by a corporation and held by shareholders (i.e., issued shares that are not held in the treasury).
Par value method: A method of accounting for treasury shares that charges the treasury stock account for the aggregate par or stated value of the shares acquired and charges the excess of the purchase cost over the par value to paid-in capital and/or retained earnings. A deficiency of purchase cost is credited to paid-in capital.
Participating: An optional characteristic of preferred stock whereby preferred shareholders may share ratably with the common shareholders in any profit distributions in excess of a predetermined rate. Participation may be limited to a maximum rate or may be unlimited (full).
Performance-based options: Options that are granted to employees conditional on the achievement of defined goals.
Phantom stock plan: A type of stock compensation arrangement that gives employees the right to participate in the increase in value of the company's shares (book value or market value, as stipulated in the plan) without actually being required to purchase the shares initially.
Quasi reorganization: A procedure that reclassifies amounts from contributed capital to retained earnings to eliminate a deficit in that account. All the assets and liabilities are first revalued to their current values. It represents an alternative to a legal reorganization in bankruptcy proceedings.
Retained earnings: The undistributed earnings of a firm.
Service period: The period over which a stock-based compensation award is earned by the recipient. If not otherwise defined in the plan, it is the vesting period.
Stock-based compensation: Any of a wide variety of compensation arrangements under which employees receive shares of stock, options to purchase shares, or other equity instruments, or under which the employer incurs obligations to the employees based on the price of the company's shares.
Stock options: Enables officers and employees of a corporation to purchase shares in the corporation.
Stock rights: Enables present shareholders to purchase additional shares of stock of the corporation. It is commonly used if a preemptive right is granted to common shareholders by some state corporation laws.
Suspense shares: ESOP shares that usually collateralize ESOP debt. They have not been allocated or committed to be released.
Tandem options: Compensation plans under which employees receive two or more components, such as options and stock appreciation rights, whereby the exercise of one component cancels the other(s). The accounting is based on the component that is more likely to be exercised.
Treasury stock: Shares of a corporation that have been repurchased by the corporation. This stock has no voting rights and receives no cash dividends. Some states do not recognize treasury stock. In such cases, reacquired shares are treated as having been retired.
Vesting: The process whereby the recipient of a stock-based compensation award earns the right to control or exercise the award.

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