Service condition definition
/What is a Service Condition?
A service condition is a requirement in a stock-based award agreement that impacts the vesting, exercise price, or other factors related to the fair value of an award that is based on the provision of services by the recipient to the employer. The accountant needs to understand a service condition in order to properly account for the associated award.
Example of a Service Condition
As an example of a service condition, an employer sets up a stock-based award agreement with an employee, in which the employee must work for the employer for a period of five consecutive years, while generating at least $1 million of sales of products and services in each of those five years. If the employee meets these conditions, then she will receive a stock grant of 10,000 shares of employer stock at the end of the five-year period.