Share - Based Payment Flashcards

1
Q

Two Types of Settlement

A

Equity Settled
Cash Settled

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2
Q

Equity Settled

What are the 2 methods?
How to compute compensation in each methods?

A

Share Options

Methods
1. FV method
- Compensation = FV of options @ date of grant

2. Intrinsic Value method
- Compensation = MP less Option Price
- Used only if FV method is not applicable

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3
Q

Cash Settled

How to measure liability?

A

Share Appreciation Rights

Liability = MP less Price

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4
Q

Vesting

Immediately vs Not Immediately
Requirements for employees for above
How to recognize compensation expense for above?

A

Immediately
- employee not required to do something
- Compensation expense = Recognized fully at grant date

Not Immediately
- employee need to complete a specified service period
- Compensation Expense = Recognized over the vesting period

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5
Q

What if the condition is based on Share Price?

A

IGNORE (employees can’t do anything about it)

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