The ESOP repurchase obligation is the company’s obligation, as created by the ESOP put option, to buy back shares from ESOP participants according to the company’s ESOP document and ESOP Distribution Policy.
Last week we defined the ESOP Repurchase Liability and how the ESOP Repurchase Obligation is Reported on the Company's Financial Statements. In order to accurately forecast the company’s ESOP future repuchase obligation, it is essential to understand and properly account for the interrelationship between the ESOP stock valuation and the ESOP repurchase obligation.
We have recently discussed the importance of Identifying your Long-Term ESOP Objectives and Developing Accurate ESOP Repurchase Obligation Forecast Assumptions as part of the ESOP Repurchase Obligation process. Today we will look at the significance of the ESOP Distribution Policy. Here is a quick summary of the various Timing of ESOP Distribution rules: