Module 9.7: Share-Based Compensation

Question 1

accounting for stock grants

Answer 1

based on the fair value of the stock on the grant date

The compensation expense is allocated over the employee’s service period.

Question 2

accounting for stock options

Answer 2

Compensation expense is based on the fair value of the options on the grant date based on the number of options that are expected to vest.

The compensation expense is allocated in the income statement over the service period, which is the time between the grant date and the vesting date

Question 3

vesting date

Answer 3

the first date the employee can actually exercise the options.

Question 4

Stock appreciation rights

Answer 4

right to receive compensation based on the increase in the price of the firm’s stock over a predetermined amount.

Question 5

Phantom stock.

Answer 5

payoff is based on the performance of hypothetical stock instead of the firm’s actual shares