Monte Carlo Simulation

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What Is Monte Carlo Simulation?

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Performance Share plans that are contingent on Relative Total Shareholder Return (“RTSR”) continue to gain in prevalence. However, the accounting rules under ASC 718 create financial reporting needs on the date of grant, as it is considered a market condition, and will generally require a Monte Carlo simulation. (For a full primer on performance award…

Design Levers to Lower the RTSR Fair Value

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Performance shares earned contingent on a performance metric of Relative Total Shareholder Return (RTSR) is the most prevalent globally as seen in the marketplace.  Performance awards that are contingent on Relative TSR are deemed market conditions and will generally require a Monte Carlo simulation to determine the fair value under ASC718.  Unfortunately, the fair value…