SAT case 15-1-power Point-2010

SAT case 15-1-power Point-2010 - • SFAS No. 123 (R) –...

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Unformatted text preview: • SFAS No. 123 (R) – December 2004 – Requires that companies recognize compensation expense using the fair-value method. – Fair-value of compensation is the assumed value of the services received. – Fair-values at date of grant (date options are received) can be found using acceptable option-pricing models, such as the Black-Scholes option-pricing model or the binomial lattice model. • Both models use same basic inputs: underlying stock price, risk free rate of interest, strike price, dividend yield, volatility of company’s stock price, and expected term of the option. No entry at date of grant  Total fair-value of compensation expense is allocated evenly over the service period, or period from which the expected benefit will occur. Dr. Compensation Expense XXX Cr. Paid-in Capital – Stock Options XXX Stock options are obligations to issue a company’s stock in the future SFAC No. 6 describes liabilities as obligations to transfer assets to another entity in the future as a result of a past...
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This note was uploaded on 06/04/2010 for the course ACCT 5120 taught by Professor Drstone during the Spring '10 term at UCM.

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SAT case 15-1-power Point-2010 - • SFAS No. 123 (R) –...

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