In this chapter we look at some common forms of compensation in which the amount of the compensation employees receive is tied to the market price of company stock. We will see that these share-based compensation plans-stock awards, stock options, and stock appreciation rights-create shareholders’ equity. The nature of this compensation will impact the way we calculate earnings per share, the topic of the second part of this chapter. | Share-Based Compensation and Earnings Per Share Chapter 19 Chapter 19: Share-Based Compensation and Earnings Per Share. In this chapter we look at some common forms of compensation in which the amount of the compensation employees receive is tied to the market price of company stock. We will see that these share-based compensation plans—stock awards, stock options, and stock appreciation rights—create shareholders’ equity. The nature of this compensation will impact the way we calculate earnings per share, the topic of the second part of this chapter. Share-Based Compensation Compensation: Salary Stock awards Stock Award Plans Restricted stock plans Usually tied to continuing employment. Compensation is market price at date of grant. Compensation expense accrued over service period. Typically, an executive compensation plan is tied to performance in a strategy that uses compensation to motivate it recipients. Restricted stock plans usually are tied to continued employment of the person receiving the award. The compensation associated with a share of restricted stock (or nonvested stock) is the market price at the grant date of an unrestricted share of the same stock. The amount is accrued as compensation expense over the service period for which participants receive the shares. Stock Option Plans Stock option plans give employees the option to buy a specified number of shares of the firm's stock, at a specified exercise price, during a specified period of time. The fair value is accrued as compensation expense over the service period for which participants receive the options, usually from the date of grant to when the options become exercisable (the vesting date). Stock option plans give employees the option to buy (a) a specified number of shares of the firm's stock, (b) at a specified exercise price, (c) during a specified period of time. The fair value is accrued as compensation expense over the service period for which participants receive the options, usually | Share-Based Compensation and Earnings Per Share Chapter 19 Chapter 19: Share-Based Compensation and Earnings Per Share. In this chapter we look at some common forms of compensation in which the amount of the compensation employees receive is tied to the market price of company stock. We will see that these share-based compensation plans—stock awards, stock options, and stock appreciation rights—create shareholders’ equity. The nature of this compensation will impact the way we calculate earnings per share, the topic of the second part of this chapter. Share-Based Compensation Compensation: Salary Stock awards Stock Award Plans Restricted stock plans Usually tied to continuing employment. Compensation is market price at date of grant. Compensation expense accrued over service period. Typically, an executive compensation plan is tied to performance in a strategy that uses compensation to motivate it recipients. Restricted stock plans usually are tied to continued employment of the .
