LTV Corporation grants SARs to key executives. Upon exercise, the SARs entitle executives to receive either cash or stock equal in value to the excess of the market price at exercise over the share price at the date of grant. How should LTV account for the awards?
LTV Corporation grants SARs to key executives. Upon exercise, the SARs entitle executives to receive either cash or stock equal in value to the excess of the market price at exercise over the share price at the date of grant. How should LTV account for the awards?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
LTV Corporation grants SARs to key executives. Upon exercise, the SARs entitle
executives to receive either cash or stock equal in value to the excess of the market price at exercise over the
share price at the date of grant. How should LTV account for the awards?
Expert Solution
Step 1
Definition:
Stock appreciation rights (SARs): Stock appreciation rights are the compensation plans provided in the form of rights to receive cash or shares for the appreciated value (the difference between the market price of shares on the exercise date and the market price of shares on the grant date). The choice between the cash or shares would be chosen either by employers or employees.
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