This video shows how a company would account for a restricted stock award when the restricted stock award creates a deferred tax asset. For purposes of financial reporting, companies expense the fair value of a restricted stock award (the fair value as of the grant date) over the vesting period of the restricted shares. For U.S. tax purposes, however, companies don't get a tax deduction until the restricted stock award vests. Thus, when a restricted stock award is expensed for financial reporting purposes before it is deductible for tax purposes, this creates a temporary difference that will make taxable income lower relative to book income in the future; this postponed tax deduction creates a deferred tax asset when the restricted stock award is expenses for purposes of financial reporting. The deferred tax asset is eliminated when the restricted stock award vests because at that point the fair value of the …
