Question

For each question, (1) provide the citation number (topic and subtopic) that addresses the question and (2) answer the question. Document this under the question, indenting your answer or otherwise indicating it is the answer (bold, underline, different color, etc.)

1. Stock Based Compensation

Richardson Company is contemplating the establishment of a share-based compensation plan to provide long-run incentives for its top management. However, members of the compensation committee of the board of directors have voiced some concerns about adopting these plans, based on news accounts related to a recent accounting standard in this area. They have asked you to conduct some research on this recent standard so they can be better informed about the accounting for these plans.

(a)   Identify the primary authoritative guidance that addresses the accounting for share-based payment compensation plans.

(b)   Briefly discuss the objectives for the accounting for stock compensation. What is the role of fair value measurement?

(c)   The Richardson Company board is also considering an employee share-purchase plan, but the Board does not want to record expense related to the plan. What criteria must be met to avoid recording expense on an employee stock-purchase plan?

Answer 1

(a)   Identify the primary authoritative guidance that addresses the accounting for share-based payment compensation plans.

(b)   Briefly discuss the objectives for the accounting for stock compensation. What is the role of fair value measurement?

(c)   The Richardson Company board is also considering an employee share-purchase plan, but the Board does not want to record expense related to the plan. What criteria must be met to avoid recording expense on an employee stock-purchase plan?

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