Page 9 - Demo

Essay on Grant-Date Fair ValueMEMORANDUM Statement of Facts On January 1, 2006, Sooner or Later Inc. granted 1,000 at the money: employee stock options which will vest only if cumulative revenue over the following three year reporting period is greater than $10 million and the employees are still employed by Sooner or Later Inc. They adopted ASC 718, Compensation Stock Compensation in 2005. 1. The grant date fair value of each award is $9. With the revenue target factored into the fair value assessment the grant date fair value is $6. 2. Management believes it is probable the company will achieve cumulative revenue in excess of $10 million. 3. The requisites to vest were fulfilled. Revenue of $2 million, $5 million and $4 million was collected in... Show more content on Helpwriting.net ...Market conditions that affect an award s fair value (including exercisability) are included in the estimate of grant date fair value (see paragraph 718 10 30 15). Performance or service conditions that only affect vesting are excluded from the estimate of grant date fair value, but all other performance or service conditions that affect an award s fair value are included in the estimate of grant date fair value (see that same paragraph). c. Due to the inclusion of the pertinent factors phrase and the fact that market conditions affect an award s fair value, the $6 grant date fair value, with the revenue target factored in, is a more precise value. 2. Sooner or Later Inc. should recognize compensation cost over the three year reporting period. d. ASC 710 10 25 9 addresses the recognition of deferred compensation arrangements. It states: To the extent the terms of a contract attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits shall be accrued over that period of the employee s service in a systematic and rational manner. The compensation costs associated with the stock options should be allocated over the three year reporting period. e. ASC 718 10 25 2 states that, an entity shall recognize the services received in a share based payment transaction with an employee as services are received. As the