Option pril settle cash loss loss 20000 100 100 20100

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Unformatted text preview: $300-$100 Firm A’s Accounting for Option Firm A January 2 Derivative – trading Cash 400 400 March 31 Derivative – trading 20,000 Gain 20,000 Intrinsic Value = 1,000 shares *($100 - $120)=20,000 sume ssume the options are trading at $20,100 Gain/Loss Derivative – trading *300= $400 – ($20,100-20,000) Time Value=20,100-20,000=100 300* 300 Firm A’s Accounting for Option Firm A pril 1, the firm settle the option pril settle Cash Loss Loss 20,000 100 100 20,100 Derivative - trading Date Intrinsic Intrinsic Value Value Time Time Value Value Option Option Value Value Jan. 2 Mar. 31 Apr. 1 $0 $20,000 $20,000 $400 $100 $0 $400 $20,100 $20,000 Compensatory Stock Option Plans Compensatory Stock Option Plans (CSOP) • • Provide the employees with an opportunity to Provide the purchase shares at a given price, within a specified period of time specified Two accounting issues associated with stock Two compensation plans compensation 1. Determination of compensation expense 2. Periods of allocation for compensation expense Periods amounts CSOP ­ Important Dates CSOP ­ Important Dates Measurement Date Vesting/service period Work start date Grant Grant date date Vesting Vesting date date Exercise date Expiration date Options Options are granted to granted employee Date that Date employee employee can first exercise options Employee exercises options Unexercised options expire...
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