- CFA Exams
- CFA Level I Exam
- Study Session 5. Financial Reporting and Analysis (1)
- Reading 14. Employee Compensation: Post-Employment and Share-Based
- Subject 5. Accounting for Stock-Based Compensation
CFA Practice Question
On January 2, 2011, Wilson, Inc. granted Brice Wilson, its president, 15,000 stock appreciation rights that are exercisable no sooner than December 31, 2013 and expire on January 1, 2016. On exercise, Wilson will receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. The market price of Wilson's stock was $40 on January 2, 2011, and $50 on December 31, 2011. As a result of the stock appreciation rights, Wilson Inc. should recognize compensation expense for 2011 of
A. $30,000
B. $50,000
C. $150,000
Explanation: [($50 - 40) x 15,000] / vesting period (3 years).
User Contributed Comments 3
| User | Comment |
|---|---|
| gaurav1207 | Vesting period = Exc date - Grant date |
| gaurav1207 | correction to above, Service period = Vesting date - Grant date Vesting date is the date at which the option can be first exercised |
| D3456 | So what happens in future periods? Say the price returns to $40 in the next period, does this reverse the $50K? |