QuestionQuestion

Central Manufacturing is contemplating the establishment of a share-based compensation plan to provide long-run incentives for its top management.
However, members of the compensation committee of the board of directors have voiced some concerns about adopting these plans based on news accounts related to a recent accounting standard in this area.
They would like you to conduct some research on this standard so they can be better informed about the accounting for these plans.
1.Identify the top level of authoritative literature that addresses the accounting for share-based payment compensation plans.
2.Briefly discuss the overall objective for the accounting for stock compensation.
3.When should an entity normally recognize services received by an employee related to a share-based transaction?
4.What two conditions are required in order for the grant date of the share-based payment to be established as the date the corporate governing body (e.g. board of directors) approves the share-based payment?
5.The Central Manufacturing board is also considering an employee share-purchase plan, but the board does not want to record expense related to the plan. What three criteria must be met to avoid recording expense on an employee stock-purchase plan?

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1. Identify the top level of authoritative literature that addresses the accounting for share-based payment compensation plans.

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. (FASB, 2004)...
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