BUS1 121B Intermediate Accounting II
Respond to the following prompt
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?
Show all your workings and cite ASC where appropriate.
Your assignment will be graded based on the following rubric:
Category | Unacceptable (0-1) | Needs Improvement (2-3) | Good (4) | Excellent (5) | Total Possible Points |
Organization (x3) | There is no apparent organization to the answers. They shows some coherence but ideas lack unity. | There is some level of organization though digressions, ambiguities, irrelevance are too many. Transition evident but not used throughout the paper. | Answers are coherent and logically organized with transitions used between ideas and paragraphs to create coherence. Overall unity of ideas is present. | Answers show high degree of attention to logic and reasoning of points. Unity clearly leads the reader to the conclusion and stirs thought regarding the topic. | 15 |
Content (x3) | Answers lack evidence of critical thinking. Writer uses superficial, simplistic, or irrelevant reasons and unjustifiable claims. Makes illogical, inconsistent inference. | Answers are primarily opinion without valid support. Little critical thinking is evident. Follows existing evidence to obtain conclusions. | Ideas are logical and reasoned, but demonstrate lesser degree of originality. Follows evidence and reason lead to obtain justifiable, logical conclusion. | Writer develops logical and reasoned independent ideas that go beyond predictable outcomes or the conclusions of researched materials. Follows where evidence and reason lead in order to obtain defensible, thoughtful, logical conclusions or solutions. | 15 |
Grammar & Mechanics(x2) | Sentences are unclear and many grammatical errors in structure make answers virtually unreadable. Spelling, punctuation, capitalization, and vocabulary usage contain major flaws that impede readability. | Most spelling, punctuation, and grammar correct allowing reader to progress through the answers. Some errors remain. | Answers have few spelling, punctuation, and grammatical errors allowing reader to follow ideas clearly. Very few fragments or run-ons. | Answers are free of distracting spelling, punctuation, and grammatical errors; absent of fragments, comma splices, and run-ons. | 5 |
BUS1 121B Intermediate Accounting II