Accounting for equity compensation is complex, with six major hazards that can lead to costly errors. These include incorrect tax withholding when covering with restricted stock, triggering variable accounting risks; poor handling of modifications, which can unexpectedly increase expenses; and misapplied forfeiture estimates, leading to significant true-ups. Tax accounting adds further challenges with deferred tax assets, APIC tracking, and international complexities. Retirement provisions can accelerate expense recognition, while performance targets and market-based awards pose valuation and reversal risks. Careful plan design, documentation, and automation are essential to ensure compliance and avoid restatements.

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