ExpertMedium1 markMultiple Choice
CPA · Question 26 · Area II: Technical Accounting
Which of the following is an example of a 'Market' condition in a share-based payment arrangement?
Which of the following is an example of a 'Market' condition in a share-based payment arrangement?
Answer options:
A.
Options vest if the company's stock price reaches $100.
B.
Options vest if the employee remains employed for 3 years.
C.
Options vest if the company's EPS grows by 10%.
D.
Options vest upon the completion of an IPO.
How to approach this question
Service = Time. Performance = Internal metric (Sales, EPS, IPO). Market = Share price or TSR.
Full Answer
A.Options vest if the company's stock price reaches $100.✓ Correct
ASC 718 distinguishes between Service, Performance, and Market conditions. Market conditions relate to the achievement of a specified share price or specified amount of intrinsic value of a share-based payment award (e.g., stock price target, Total Shareholder Return relative to an index).
Common mistakes
Confusing Performance conditions (internal metrics) with Market conditions (stock price).
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