CEP Cheat Sheet 2026

The 30 highest-yield CEP facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. For US federal income tax purposes, when does a non-qualified stock option (NQSO) create a taxable event for the employee? → At exercise
2. Which Internal Revenue Code section governs the tax treatment of nonqualified deferred compensation plans, imposing a 20% additional tax on violations? → IRC Section 409A
3. What is an internal control in CEP financial management? → A process providing assurance about financial reporting reliability
4. What is the primary purpose of financial analysis in equity compensation? → To evaluate plan impact
5. Which of the following award structures is MOST likely to trigger liability (mark-to-market) accounting under ASC 718? → Cash-settled SARs where the company has an obligation to pay cash upon exercise
6. For NQSOs, the employer is required to withhold income taxes at exercise on: → The spread between FMV and exercise price
7. What differentiates fixed from variable costs in CEP? → Fixed costs stay constant; variable costs change with volume
8. Which financial statement disclosure is required by ASC 718 regarding the weighted-average grant-date fair value of options granted during the period? → It must be disclosed in the notes to financial statements
9. Under the constructive receipt doctrine, a voluntary deferral election for an RSU must generally be made: → Within 30 days after RSU grant, before a substantial risk of forfeiture is established
10. Which reporting obligation requires a beneficial owner who crosses the 5% ownership threshold of a public company's shares to file with the SEC within 10 days? → Schedule 13D or 13G under Section 13(d)
11. Which IRS form must a company provide when an employee transfers ESPP shares acquired under a Section 423 plan? → Form 3922
12. A company grants SARs settled in cash. Under ASC 718, how must these awards be classified for accounting purposes? → Liability-classified, remeasured at fair value each reporting period
13. What is financial forecasting in CEP practice? → Predicting future conditions based on historical data and trends
14. What typically happens to an employee's ESPP payroll contributions when they terminate employment during an offering period? → Accumulated contributions are refunded to the employee without interest
15. Which of the following is a valid basis for setting the purchase price under a Section 423 ESPP? → 85% of the lower of FMV on the offering date or the purchase date
16. What is a 'sell-to-cover' RSU release transaction? → Selling a portion of the vested RSU shares to cover the tax withholding obligation
17. Which of the following represents a 'clawback' risk for a CEP professional managing an executive equity plan? → The risk that previously paid compensation must be recouped due to a financial restatement
18. Under a Section 423 ESPP, the $25,000 annual accrual limit is based on the FMV of the stock measured at: → The first day of each offering period in which the right is granted
19. A restricted stock award (RSA) with an 83(b) election results in taxation: → At the time of grant, based on the fair market value of the shares
20. RSUs are taxed as ordinary income at: → Vesting date, based on FMV of shares delivered
21. Which accounting standard governs the financial reporting of share-based payment transactions under IFRS? → IFRS 2
22. A participant receives RSUs and wants to minimize tax liability at vesting. Which strategy could defer taxation if permitted by the plan? → Enrolling in a non-qualified deferred compensation (NQDC) arrangement
23. What is budget variance analysis in CEP financial management? → Comparing actual spending against budgeted amounts to explain differences
24. Which of the following scenarios would result in a 'disqualifying disposition' of ISO shares? → Selling ISO shares eight months after exercise
25. Which provision of IRC Section 162(m) limits the tax deductibility of executive compensation? → Compensation over $1 million paid to covered employees is not deductible
26. An employee exercises NQSOs on February 1 and sells the acquired shares on December 15 of the same year. This transaction is classified as a: → Disqualifying disposition
27. An employee receives an RSA (Restricted Stock Award) and files an 83(b) election within 30 days of grant. When will the employee recognize ordinary income? → At grant
28. Which forfeiture accounting policy did ASU 2016-09 permit companies to elect instead of estimating a forfeiture rate at grant date? → Recognize forfeitures as they occur rather than estimating upfront
29. What is the role of a stock plan administrator? → Managing plan administration
30. What is the purpose of the Sarbanes-Oxley Act in relation to equity compensation? → To ensure reporting accuracy