405 - Ch 19 Smartbook EPS

The effect of changes in estimated option forfeitures must be recognized

cumulatively in the year the estimate changes.

Which of the following are among the factors that must be considered in order to estimate the total compensation associated with stock options? (Select all that apply.) Multiple select question. current market price of the stock exercise price of the options expected term of the option market price of the stock at time when stock options are exercised

current market price of the stock exercise price of the options expected term of the option

On January 2, 20X1, Utta Corp. (a calendar-year company) grants 15,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share; the estimated market value of each option is $5. The company's average tax rate is 30%. To reflect the tax effect of these nonqualifying stock options, Utta Corp. should (Select all that apply.) Multiple select question. debit tax receivable for $7,500. debit deferred tax asset for $7,500. credit tax payable for $7,500. credit income tax expense for $7,500.

debit deferred tax asset for $7,500. credit income tax expense for $7,500.

Stock options, rights, and warrants must be considered when calculating (blank) EPS.

diluted

Contingent issuable shares may be included in the calculation of

diluted EPS.

Dividends per common share divided by earnings per share provides an indication of

dividend payout.

Basic EPS is determined by dividing:

earnings available to common shareholders by weighted-average common shares outstanding.

Which of the following accounting numbers is reported most frequently by the media?

earnings per share

The accounting method for stock options affects reporting of:

expense

The FASB's 1993 exposure draft on stock options proposed that the estimated value of stock options should be

expensed.

When estimates of options forfeitures change, the cumulative effect on compensation is recognized

in current earnings.

When the effect of potential common shares is dilutive on EPS for _______, it should be included in all components of diluted earnings per share.

income from continuing operations

Yves Company has convertible securities that are dilutive with respect to some components of reported EPS, but are antidilutive to other components. Which financial statement line item should be used to determine whether to include the potential common shares in the calculation of diluted EPS?

income from continuing operations

When the tax benefit derived from nonqualifying stock options exceeds the amount recognized as a deferred tax asset, the company should recognize the difference by

increasing paid-in capital.

Accounting for stock option plans consistent with the FASB's recommendation provided two choices for valuing stock options. What were these choices? Multiple select question. intrinsic value method present value method zero value method Black-Scholes method fair value method

intrinsic value method fair value method

When a company recognizes compensation expense related to restricted stock units awards payable in cash, the company should also credit a(n) (blank).

liability

On the date when stock options are granted, the sponsoring company should

measure the fair value of the options.

An actual conversion of dilutive convertible securities will (Select all that apply.) Multiple select question. not affect the reported amount of diluted EPS. increase the reported amount of diluted EPS. decrease the reported amount of diluted EPS. decrease the reported amount of basic EPS.

not affect the reported amount of diluted EPS. decrease the reported amount of basic EPS.

Compensation expense related to share-based awards is recognized regardless of whether the market-related conditions are met because

option-pricing models already implicitly reflect market conditions.

From an accounting perspective, the significance of the stock option vesting period is that it is the time period

over which compensation expense is allocated.

Securities that may become common shares in the future are considered

potential common shares.

The treasury stock method takes into account the dilutive effect of stock options and assumes that the proceeds from the exercise of options are used to

purchase treasury shares.

Under a ______ stock option incentive plan, the exercise price of stock options must be ______ the market price at the grant date.

qualified; equal to

If a company issues non-qualifying stock options to employees, it

recognizes a deferred tax asset related to compensation expense recorded in current period accounting income that is not yet deductible

For the purpose of deriving EPS, securities are considered dilutive if they are capable of

reducing earnings per share.

When it becomes probable that a performance target will not be met, previously recognized compensation expense must be:

reversed

Stock options are said to be "in the money" if

the current market price of the stock exceeds the option exercise price.

The time between the date that options are granted and the first date they can be exercised is referred to as the (blank) period.

vesting

Vogel Corp.'s denominator for calculating diluted EPS is 57,300 weighted-average shares. Included in the denominator were 5,000 shares related to convertible preferred stocks assumed to have been converted. If the convertible preferred stock had actually been converted, the weighted-average shares for purposes of diluted EPS would have been

57,300 shares.

Munster Company issued options to a key executive that are contingent on the company achieving a 10% increase in sales revenue within the next 12 months. The company believes that it is likely that this target will be achieved and accrues $5 million in related compensation expense. After 9 months, the company estimates that it is possible, but not likely that the target will be achieved. Based on this new estimate, the company must

credit compensation expense for $5 million.

Total compensation associated with restricted stock awards typically is equal to the shares'

market price at grant date of the award.

When stock options expire, compensation expense

is not affected.

Which of the following common or potential common shares must be considered for inclusion in basic EPS?

vested restricted stock awards

Which of the following will result in the distribution of additional shares? (Select all that apply.) Multiple select question. Stock splits Cash dividend Stock dividends

Stock splits Stock dividends

Which of the following scenarios will increase total assets and equity?

The sale of new shares

Which of the following is correct regarding stock options and other share-based plans?

They frequently specify a performance or market condition.

On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $6 per option. During 20X4, 9,000 stock options were exercised. In 20X5, the remaining stock options expire. Utta should recognize the expiration by debiting

paid-in capital—stock options for $6,000.

A low dividend payout ratio may indicate that the company is

planning to reinvest its earnings.

(blank) (blank) plans give employees the choice to purchase a specified number of shares of the firm's stock at a specified price during a specified period of time.

stock option

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at face. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the numerator of diluted EPS?

$21,000 Reason: $1,000 x 500 x 6% x (1 - 0.3)

On January 2, 20X1, Utta Corp. grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the stock is equal to the exercise price. The estimated value of the options on the date of grant is $6 per option. On the date of grant, the company should

not recognize any expense relating to the options.

During 20X1, Margot Corp. has 10,000 unexercised stock options outstanding. The option price is $10 per share, the average market price during 20X1 is $14 per share, and the end-of-year market price is $13 per share. Consistent with the application of the treasury stock method, how many shares is Margot Corp. assumed to repurchase (round to the nearest share)?

7,143 shares Reason: $100,000/$14

True or false: The adjustment for the assumed conversion of preferred stock affects both basic and diluted EPS computations.

False

Which of the following statements regarding the effect of the intrinsic value method on the valuation of stock options is correct?

It typically results in zero compensation expense.

Kilian Company issued stock options on August 1, 20X1. For the purpose of calculating dilutive EPS for the year ended December 31, 20X2, the options should be assumed to have been exercised on

January 1, 20X2.

Which of the following statements regarding the prevalence of stock option awards is correct?

Many large and medium-size companies grant stock options.

Which of the following represents an important accounting issue with respect to stock option plans?

Measurement of the related compensation

What condition must be met to include contingent issuable shares in the calculation of diluted EPS?

Meeting the target performance level is already complete.

Which of the following is correct regarding the nature of restricted stock?

The shares typically are contingent on the continued employment of the awardee.

On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During 20X4, when the market value of the stock is $30 per share, 9,000 stock options were exercised. Utta Corp. should recognize this event by debiting (Select all that apply.) Multiple select question. cash for $180,000.

cash for $180,000. paid-in capital—stock options for $54,000.

Expensing of the value of stock options

does not affect cash flows.

Consistent with the revised FASB standard on stock options, the value of stock options

must be recognized as an expense.

Under its restricted stock award plan, Katrin Corp. grants 100,000 of its $1 par value common shares to certain executives on January 2, 2018. The awards are contingent on continued employment for 4 years. Shares have a current market value of $10 per share. For the year ended December 31, 2021, Katrin should recognize compensation expense of

$250,000. Reason: (100,000 x 10)/4

Place the presentation of earnings per share in the correct order.

1. EPS - income from continuing operations 2. EPS - discontinued operations 3. EPS - net income

Pfeffer Company reports net income of $360 million for 20X1; the company's tax rate is 40%. At the beginning of the year, 200,000 common shares were outstanding. On August 1, the company issued an additional 120,000 shares. Weighted-average shares will be

250,000.

Salt Company reports net income of $360 million for 20X1; the company's tax rate is 40%. At the beginning of the year, 200 million common shares were outstanding. On July 1, Salt sells an additional 80 million shares. On October 1, the company distributed a 10% stock dividend. The company's weighted-average shares for the purpose of calculating basic EPS will be

264 million. Reason: [200 + (80 x 6/12)] x 1.1

During 20X1, Blumen Corp. has 10,000 unexercised stock options outstanding. The option price is $10 per share, and the average market price during 20X1 is $16 per share and the end-of-year market price is $15 per share. Consistent with the application of the treasury stock method, how many shares should Blumen include in the denominator for calculating diluted EPS?

3,750 shares Reason: 10,000 - ($100,000/$16)

Which of the following will qualify a company for having a simple capital structure for the purpose of earnings per share?

A company that has no outstanding securities that could potentially dilute EPS.

Which of the following potential common shares may be included in the calculation of diluted EPS, but not basic EPS? Multiple select question. Contingent issuable shares Stock options Convertible securities Outstanding common shares Restricted stock

Contingent issuable shares Stock options Convertible securities Restricted stock

Which of the following are common types of restricted stock plans? (Select all that apply.) Multiple select question. Restricted stock rights Restricted stock debentures Restricted stock units Restricted stock awards

Restricted stock units Restricted stock awards

Which of the following methods will affect both the numerator and the denominator of diluted earnings per share?

The "if converted" method

Gruen Inc. has 1,000, $100 par, 6% preferred stocks outstanding during the entire year. Each preferred stock can be converted into 2 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the denominator of diluted EPS assuming the preferred stocks were dilutive?

The denominator would increase by 2,000 shares.

Gruen Inc. has 1,000, $100 par, 6% preferred stocks outstanding during the entire year. Each preferred stock can be converted into 2 shares of common stock.The company's tax rate is 30%. What would be the effect of the assumed conversion on the numerator of diluted EPS assuming the preferred stocks were dilutive?

The numerator would be $6,000 greater. Reason: Remove the deduction of preferred dividends from the numerator. 1,000 shares x $100 par x 6% = $6,000

For the purpose of calculating diluted EPS, convertible preferred stock is

assumed to have already been converted.

Basic EPS represents the income earned by one share of

common stock.

Which of the following represent typical goals of executive compensation plans? (Select all that apply.) Multiple select question. To provide compensation to certain employees. To significantly reduce corporate tax obligations. To reduce reported net income. To create performance incentives for certain employees.

To provide compensation to certain employees. To create performance incentives for certain employees.

On January 2, 201X1, Muenster Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $4 per option. During 20X4, 8,800 stock options were exercised. In 20X5, the remaining stock options expire. How will the expiration of the stock options affect the company's compensation expense?

Compensation expense will not be affected.

If convertible securities are dilutive to EPS, the effect of the assumed conversion will (Select all that apply.) Multiple select question. increase the numerator by interest on bonds or preferred dividends that would have been avoided. decrease the denominator by the additional common shares that would have been issued upon conversion. increase the denominator by the additional common shares that would have been issued upon conversion. decrease the numerator by interest on bonds or preferred dividends that would have been avoided.

increase the numerator by interest on bonds or preferred dividends that would have been avoided. increase the denominator by the additional common shares that would have been issued upon conversion

Donald Company grants stock options to certain employees. On the date of grant, Donald should measure total compensation based on

the fair value of the options.

Proceeds under the treasury stock method may include (Select all that apply.) Multiple select question. tax benefits derived from nonqualified stock options. the current market value of the stocks assumed to have been acquired with the options. total compensation from nonvested awards. amounts received under the hypothetical exercising of the options.

total compensation from nonvested awards. amounts received under the hypothetical exercising of the options.

When the tax benefit derived from nonqualified stock options is less than the amount recognized as a deferred tax asset, the company should recognize the difference by

increasing income tax expense.

Pfeffer Company reports net income of $120,000 for 20X1; the company's tax rate is 40%. Throughout the year, 200,000 common shares were outstanding. Pfeffer's basic EPS will be

$0.60.

At the beginning of the year, Solen Corp. had 100,000 shares of common stock outstanding. On April 1, the company issued an additional 60,000 shares. Weighted-average shares for the year will be

145,000 shares. Reason: 100,000 + (60,000 x 9/12)

Salt Company reports net income of $360 million for 2017; the company's tax rate is 40%. At the beginning of the year, 200 million common shares were outstanding. On July 1, Salt sold an additional 80 million shares and on October 1 distributed a 10% stock dividend. On December 1, the company reacquired 24 million of its outstanding shares. The company's weighted-average shares for the purpose of calculating basic EPS will be

262 million. Reason: [(200 + [80 x 6/12]) x 1.1] - 24/12

During the year 20X1, Corner Inc. has 10,000 stock options outstanding. The option exercise price is $10 per share. The average market price of the stock is $20. Consistent with the treasury stock method, how many incremental shares should Corner Inc. include in the weighted-average shares relating to its stock options?

5,000 shares Reason: 10,000 - ($100,000/$20)

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at face. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the denominator of diluted EPS?

7,000 shares would be added.

What counterarguments did the FASB make in response to constituents' criticism on the 1993 stock option exposure draft? (Select all that apply.) Multiple select question. Stock options have a definite value that can be easily verified. Options represent valuable compensation at the option grant date. The value of stock options can be measured/estimated.

Options represent valuable compensation at the option grant date. The value of stock options can be measured/estimated.

Which of the following shares may be included in the calculation of basic EPS?

Outstanding common shares

Which of the following are among the factors that must be considered in order to estimate the total compensation associated with stock options? (Select all that apply.) Multiple select question. expected volatility in the market value of the options expected risk-free rate of return during the option term expected dividends on the underlying stock expected volatility of the stock price

expected risk-free rate of return during the option term expected dividends on the underlying stock expected volatility of the stock price

Under current GAAP, stock options must be reported in the income statement at

fair value.

When we include options, rights, and warrants in the calculation of diluted EPS, we pretend that the potential increase in shares

has already occurred.

The method that assumes that a conversion into common stock occurred at the later of the beginning of the period or the time the convertible security is issued is referred to as the ____ method.

if converted

Which of the following are valid categories of stock option plans for tax purposes? (Select all that apply.) Multiple select question. incentive stock option plans nonqualified stock option plans non-incentive stock option plans

incentive stock option plans nonqualified stock option plans

Restricted stock awards are

included in the calculation of EPS if unvested.

The price-earnings ratio indicates a company's earnings quality by

indicating the multiple the market is willing to pay for earnings

The rules surrounding the calculation of earnings-per-share are designed to _____ comparability by _______ differences in the calculation from one company to the next.

maximize; minimizing

In calculating diluted EPS under the treasury stock method, one component of the proceeds from the exercise of options include

cash received at exercise

In calculating EPS, preferred stock dividends are subtracted from the numerator because EPS represents earnings available to (blank) shareholders.

common

When restrictions are lifted on restricted stock units for par value stock, paid-in capital restricted stock is replaced by (Select all that apply.) Multiple select question. common stock paid-in capital - excess of par compensation expense

common stock paid-in capital - excess of par

On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During 20X4, 9,000 stock options were exercised. Utta Corp. should recognize this event by crediting (Select all that apply.)

common stock for $9,000. paid-in capital in excess of par for $225,000.

Under its restricted stock award plan, Katrin Corp. grants 100,000 of its $1 par value common shares to certain executives on January 2, 2018. The award is contingent on continued employment for 4 years. Shares have a current market value of $10 per share. On January 2, 2021, 10% of the share awards were forfeited. Katrin should credit

compensation expense for $75,000.

Under its restricted stock award plan, Kilian Corp. grants 100,000 of its $1 par value common shares to certain executives on January 2, 2018. The award is contingent on continued employment for 4 years. Shares have a current market value of $10 per share. On January 2, 2020, 15% of the share awards were forfeited. Kilian should credit

compensation expense for $75,000. Reason: (100,000 x 10)/4 x 3 x 10%

Frohe Inc. sponsors a restricted stock units award plan under which employees can choose to receive either company stock or cash. Frohe should determine the fair value of the award:

on the date of grant

Which of the following would prevent Norbert Company from having a simple capital structure for the purpose of reporting EPS?

convertible preferred stocks

Which of the following may result in potential common shares? (Select all that apply.) Multiple select question. nonconvertible bonds convertible preferred stocks common stocks authorized convertible bonds nonconvertible preferred stocks

convertible preferred stocks convertible bonds

Maggie Company issued options valued at $1 million to one of its executives that are contingent on the company achieving a 10% increase in sales revenue within the next 12 months. The company believes that it is not possible that this target will be achieved. After 6 months, the company estimates that it is probable that the target will be achieved. Based on this new estimate, the company must

debit compensation expense for $1 million.

Marian Company granted restricted stock units for its par value stock to its top executives. When the restriction is lifted, Marian should (Select all that apply.) Multiple select question. debit paid-in capital in excess of par. debit paid-in capital—restricted stock. credit paid-in capital—restricted stock. credit common stock. credit paid-in capital in excess of par.

debit paid-in capital—restricted stock. credit common stock. credit paid-in capital in excess of par.

The adjustment for the conversion of convertible preferred stock is applied to

diluted EPS only

Share-based plans typically are grouped into two major categories based on the conditions that must be met by employees in order to receive the benefits of the award. These categories are Multiple select question. executive plans. managerial plans. performance-based plans. market-based plans.

performance-based plans. market-based plans.

When a company reacquires its own shares, and weighted-average shares are calculated for the purpose of determining EPS, the reacquired shares that are subtracted from the weighted-average calculation are weighted for the

period that they are not outstanding.

Which of the following are subtracted when determining earnings available to common shareholders?

preferred stock dividends

Initially, recognition of compensation expense for performance-based plans requires that the achievement of the target is

probable

Muller Company sponsors a performance-based stock option plan. When the options are granted, Muller should recognize related compensation expense if it is (blank) that the performance target will be met.

probable or likely

The price-earnings ratio provides an indication of a company's

quality of earnings.

The "if converted method" assumes that convertible securities were converted into common stock at what point?

the beginning of the current period

The way we take into account the dilutive effect of stock options is referred to as the (blank) stock method.

treasury

Salt Company reports net income of $360 million for 20X1; the company's tax rate is 40%. At the beginning of the year, 200 million common shares were outstanding. On July 1, Salt sells an additional 80 million shares. On October 1, the company distributed a 10% stock dividend. Rounding to the nearest cent, the company's basic EPS will be

$1.36. Reason: $360/[(200 + [80 x 6/12]) x 1.1]

Salt Company reports net income of $360 million for 20X1; the company's tax rate is 40%. Throughout the year, 200 million common shares were outstanding. Salt's basic EPS will be

$1.80. Reason: $360/200

Adam Company's net income for the year is $100 million. Weighed-average shares are 50 million shares. In addition to common shares, the company also has $50 million par value, 8% cumulative preferred stock outstanding. The company's basic EPS will be

$1.92 Reason: ($100 - $4)/50

Waldemar Company's net income for the year is $300 million. Weighed-average shares are 150 million shares. In addition to common shares, the company also has $100 million par value, 6% cumulative preferred stock outstanding. The company's basic EPS will be

$1.96. Reason: ($300 - $6)/150

Falken Company awards 1,000 shares of common stock to Robert Small. The shares are restricted and require that Robert remains with the company for at least 2 more years. The current market price of the shares is $15 per share. Total compensation associated with this restricted stock award is

$15,000.

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at 102 % and the premium is amortized straight-line over 10 years. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the numerator of diluted EPS?

$20,300 Reason: Premium : $1,000 x 2% x 500 = 10,000 [(1,000 x 500 x 6%) - (10,000/10)](1 - 0.3)

Bonnie Inc. has 500, 6%, $1,000 face amount bonds outstanding during the entire year. The bonds were issued at 98 % and the discount is amortized straight-line over 10 years. Each bond is convertible into 14 shares of common stock. The company's tax rate is 30%. What would be the effect of the assumed conversion on the numerator of diluted EPS?

$21,700 Reason: Discount= 500 x 2% x $1,000= 10,000 [(1,000 x 500 x 6%) + (10,000/10)] x (1 - 0.3)

Stock options give employees the choice to purchase ________ during a specific time period.

a specified number of shares of the firm's stock at a specified price

True or false: In calculating diluted EPS, convertible preferred stock is assumed converted only if the stock was issued during an earlier period.

False

True or false: Unlike restricted stock, recipients of restricted stock units (RSUs) benefit by the value of the shares immediately at the date of issuance.

False

Katie Company issued stock options on February 1, 20X1. For the purpose of calculating dilutive EPS, the options should be assumed to have been exercised on

February 1, 20X1.

Which of the following is true with respect to the accounting profession's response to the demand for comparable EPS numbers?

Inconsistencies in calculating EPS have been minimized.

Which of the following must be presented in the financial statement notes relating to EPS? (Select all that apply.) Multiple select question. Potential common shares not included in diluted EPS. Adjustments to the numerator for preferred dividends. Projected EPS for the subsequent period. A reconciliation of the numerator and denominator used for basic EPS to those used for diluted EPS. Material subsequent events that would have affected EPS.

Potential common shares not included in diluted EPS. Adjustments to the numerator for preferred dividends. A reconciliation of the numerator and denominator used for basic EPS to those used for diluted EPS. Material subsequent events that would have affected EPS.

Which of the following represent primary reasons given by opponents of the FASB's 1993 exposure draft on stock options? (Select all that apply.) Multiple select question. Expensing of stock options would lead to earnings management. The fair value of stock options cannot be measured. The stock options have zero fair value when the options are issued. Expensing would lead to unacceptable economic consequences.

The fair value of stock options cannot be measured. The stock options have zero fair value when the options are issued. Expensing would lead to unacceptable economic consequences.

What factor typically determines the accounting treatment for share-based plans?

The type of condition that must be fulfilled by employees of the sponsoring company.

Under its restricted stock award plan, Katrin Corp. grants 100,000 of its $1 par value common shares to certain executives on January 2, 2018. The awards are contingent on continued employment for 4 years. Shares have a current market value of $10 per share. On January 2, 2022, Katrin's journal entry should include

a credit to common stock for $100,000.

If an employee is entitled to receive cash under a restricted stock units award plan, the sponsoring company should recognize:

a liability

Frohe Inc. sponsors a restricted stock units award plan under which employees can choose to receive either company stock or cash. During the vesting period, the company should recognize the award as a credit to a:

a liability account

Earnings per share is reported very frequently in the financial press because it

tends to summarize the company's performance.

On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the stock is equal to the exercise price. On the date of grant, the estimated value of the options is $6 per option. For the year ended December 31, 20X1, Utta should

recognize compensation expense of $20,000.

Compensation relating to stock option grants should be

recognized over the service period for which employees receive options.

If share-based awards are contingent on the achievement of specific market conditions, compensation expense is

recognized regardless of whether the conditions are met.

Share-based plans that requires that the awardee continue to be employed by the granting company are typically referred to as

restricted stock plans.

Mueller Company estimates that it is unlikely that a particular executive will achieve a specific performance target. Mueller already recognized compensation expense related to this performance plan. Mueller must (blank) the related expense.

reverse or credit

Typically stock options are exercisable

several years after the grant date

Stock options are often used as employee incentives; therefore, stock options are typically exercisable

several years after they were granted.

Compensation plans that are tied to the achievement of certain targets and are used to motivate key employees are referred to as (blank) compensation plans.

share-based

The fair value of stock options is measured when the

stock options are granted.