Which of the following is an example of a 'Market' condition in a share-based payment arrangement?

Answer options:

Options vest if the company's stock price reaches $100.

Options vest if the employee remains employed for 3 years.

Options vest if the company's EPS grows by 10%.

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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