How should the firm account for the traditional equity

Assignment Help Accounting Basics

Reference no: EM132670363

Question - Ten years down the road, you go to work as the controller of a start-up tech company that received its second major round of funding about a year ago and is searching for its third round of funding in order to continue to grow. However, the company is struggling to adequately compensate its employees and is concerned about losing high-quality talent to larger, better-funded competitors. It has previously established a generous share-based compensation plan in which employees receive equity stakes in the firm in addition to normal salary, but given that the firm is a long way from going public many of the employees see the share-based compensation as valueless.

As such, the firm has established a new compensation plan wherein each employee receives, in addition to their normal stock grants of 20,000 shares per year, they receive an additional set of grant each year of 25,000 shares that vest on a graded basis of 25% per semi-annual period over the next two years and which, one year after full vesting, the firm promises to repurchase the grant at the greater of either $5 per share or the market price of the shares, if the equity is publicly traded at that time.

How should the firm account for the traditional equity-based compensation plan and the new compensation plan? Cite ASC where appropriate.

Reference no: EM132670363

Questions Cloud

Economic benefit of program implementation and delivery : Given the economic constraints facing our health care system today, identify the economic benefit of program implementation and delivery?

Describe internal control weaknesses in Everyday Supplies : Describe five (5) internal control weaknesses in Everyday Supplies' internal control for the cash receipts and billing functions

Identify the five fundamental principles of code of ethics : Identify the five fundamental principles of the Code of Ethics for Professional Accountants and explain why Ethics is very important to Accounting Profession

Current healthcare system in united states : You had the ability to change anything you wanted with regards to the current healthcare system in the United States.

How should the firm account for the traditional equity : How should the firm account for the traditional equity-based compensation plan and the new compensation plan? Cite ASC where appropriate

Health department review presentation : Create a video or PowerPoint explaining what you learned from our local trip to the health department or hospital.

Outline the implications for the auditor report : Outline the implications for the auditor's report, if any, assuming that this event is appropriately treated as per requirement (a). Justify your answer

What is alternative method to radiometric dating : What is an alternative method to radiometric dating? What are the strengths and weaknesses to this type of dating process?

Identify and explain four internal control weaknesses : Identify and explain four (4) internal control weaknesses in the inventory count arrangements of Clearview. Explain the impact of these weaknesses on the audit

User Account

All Pages