ASPE 3870 - Stock-based Compensation and Other Stock-based Payments

Question 1

Stock options

Answer 1

• Initial measurement:
  o The fair value is initially estimated based on the stock price at the grant date of stock options.
  o The stock options are recorded as contributed surplus, which is an equity account.
• Subsequent measurement:
  o The fair value of an option estimated at the grant date is not subsequently adjusted for changes in the price of the underlying stock or its volatility, the life of the option, dividends on the stock, or the risk-free interest rate.
  o The compensation cost is recognized as an expense over the period in which the related employee services are rendered.
  o An entity can choose whether to set up full compensation cost in the year of issuance or use the best available estimate of the stock options expected to be exercised.

Reference: ASPE 3870.24-.51

Question 2

Stock appreciation rights (ASPE)

Answer 2

• Initial measurement:
  o The initial compensation expense is calculated as the amount that the market value of the shares of the enterprise’s stock covered by the grant exceeds the value of the rights specified.
  o The compensation cost is recorded as a liability.
• Subsequent measurement:
  o Increases or decreases in the market value of those shares between the date of grant and the measurement date result in a change to compensation expense.
  o The compensation cost is recognized as an expense over the period in which the related employee services are rendered.
  o An entity can choose whether to set up full compensation cost in the year of issuance or use the best available estimate of the rights expected to be exercised.

Reference: ASPE 3870.24-.51