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The Employee Retirement Income Security Act of 1974 describes an Employee Stock Ownership Plan (ESOP) as a qualified stock bonus plan, or a combination stock bonus and money purchase pension plan, designed to invest primarily in "qualifying employer securities." Qualifying employer securities include the employer's stock and its other marketable obligations. The essential differences between an ESOP and other qualified stock bonus plans are that (a) an ESOP is permitted, in certain circumstances, to employ the principles of leverage in the acquisition of employer securities and (b) the employer may be permitted, under the Tax Reduction Act of 1975, to increase his maximum allowable investment tax credit by an additional 1% if that amount is contributed to an ESOP. Several accounting and reporting issues have arisen with respect to those ESOPs that borrow funds from a bank or other lender to acquire shares of stock in the employer company. These are being dealt with in practice in different ways. This Statement of Position has been issued because the Division believes it is desirable to narrow the range of alternative accounting practices in this area.
Employee stock options -- United States -- Accounting
Accounting | Taxation
American Institute of Certified Public Accountants. Accounting Standards Executive Committee, "Accounting practices for certain employee stock ownership plans; Exposure draft (American Institute of Certified Public Accountants), 1976, Sept. 30" (1976). Statements of Position. 367.