Stock Appreciation Rights

Question 1

What is the fair value of a stock appreciation right (SAR) at the exercise date?

Answer 1

The difference between grant date price and the price at exercise date

Question 2

When can compensation expense be negative for a period (SAR)?

Answer 2

When the stock price falls to a level causing total compensation expense through the end of the period to be less than compensation expense recognized in previously periods.

Question 3

What is the total compensation expense for stock appreciation rights (SARs) payable in cash?

Answer 3

Number of rights multiplied by the difference between the stock price at date of exercise, and the stock price at grant date

Question 4

What type of account is credited when periodic compensation expense is recognized for an SAR payable in cash?

Answer 4

The account credited is Liability

Question 5

Describe the features of a stock appreciation right (SAR).

Answer 5

1. )Employee receives difference between stock price at grant date, and stock price at exercise date;
2. )Pays nothing;
3. )Specifies benefit in either cash or stock