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ACFM 322 Chapter 19
| Term | Definition |
|---|---|
| Determine the fair value of the compensation Expense the compensation in the time period(s) in which employees provide service | What are the accounting objectives of share-based compensation? |
| Substantially all employees can participate Length of time for a purchase decision does no exceed 1 month from price fix Discount is not greater than 5% | If the following conditions are met, new shares purchased by employees are NOT compensation: |
| Compensation Expense | If the above criteria is not met, any discount is recorded as ____________________________________ |
| Restricted Stock Plans | Compensation is market price at grant date of unrestricted share of same stock (unless cash will be given) |
| Restricted Stock Award | Shares are awarded in the name of employee, but company may retain physical possession; shares are subject to forfeiture if employment is terminated within some specified # of years; employees may not sell shares during vesting period |
| Restricted Stock Unit | Right to receive specified # of shares of company stock; shares are distributed as recipient satisfies vesting requirement; subject to forfeiture as well; no voting rights; no right to receive dividends; if elect cash equivalent it is a liability |
| Stock Option Plans | When employees are given the right to buy shares at a specified price, within a specified # of years from grant date Compensation is fair value of stock options at grant date |
| Intrinsic Value | Difference between the market price of shares and the option price |
| Estimate percent at beginning Record when forfeitures occur | If there is a material expected forfeiture rate, there are 2 ways to record the adjustment: |
| Market Price | When options are exercised, the _______________________ on the exercise date is irrelevant |
| Tax Effects | Stock-based compensation plans are either "incentive stock option plans" or "nonqualified plans" |
| Incentive | Under _______________ plans, the recipient pays no income tax until any acquired shares are subsequently sold; the employer gets no tax deduction upon exercise of the options |
| Nonqualified | Under _______________ plans, the employee pays income tax without delay, but the employer can deduct the difference between the exercise price and market price at exercise date resulting in a DTA. |
| Graded Vesting Plans | Stock option plans that gradually vest |
| Cliff Vesting | Vest at all once |
| Compensation Expense | Companies can account for these in the same way as those that vest on one single date, or they can choose to use a more complex method that often results in lower _____________________________ |
| Tranche | Each vesting group, or _____________, is viewed as a separate award |
| Basic EPS | Earnings available to common shareholders divided by the weighted-average number common shares outstanding; reflects only shares currently outstanding (with no dilution) |
| Simple Capital Structure | When a firm has no outstanding securities that could dilute EPS |
| Potential Common Shares | Securities that may become stock through their exercise, conversion, or issuance and therefore dilute EPS: ____________________________________________ |
| Stock Options, Stock Warrants, Convertible Bonds | Examples of potential common shares |
| Retroactively | Stock splits and dividends will change the number of shares outstanding ________________________ |
| Reduced | If shares were reacquired during the period, the weighted-average number of shares is __________________ |
| Net Income - Preferred Dividends | Calculation for the earnings available to common shareholders |
| Complex Capital Structure | A firm has this if potential common shares are outstanding; requires 2 EPS |
| Basic EPS & Diluted EPS | What are the 2 EPS? |
| Diluted EPS | Incorporates the dilutive effect of all potential common shares |
Created by:
MOWGaming04
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