BU397 Chapter Notes - Chapter 16: Valuation Of Options, Market Price
Document Summary
Compensation expense: two common plans with unique accounting issues, stock appreciation rights plans, affords the right to receive compensation equal to share appreciation, performance-type plans, compensation is not based on share appreciation, criteria normally based on corporate performance. Stock appreciation rights (sars: sars designed to mitigate the complex process of exercising options and selling the related shares, employee receives any appreciation in share value. Appreciation = market price at exercise date less a pre-established price: appreciation paid out in cash, shares, or a combination, the total amount of compensation is not known until the exercise date. This creates a measurement issue: at the grant date/measurement date, an estimate must be made. Ifrs requires the use of an options pricing model. Aspe requires the intrinsic value method: the cost is then allocated over the service period using the percentage approach, problem occurs when exercise date goes beyond service period.
