Which of the following statements is true regarding share appreciation rights (SAR)payable in cash?
A)Any change in estimated total compensation is recorded as a prior adjustment.
B)The total amount of compensation is not known for certain until the date the SAR is exercised.
C)The liability is adjusted only to reflect each additional year of service.
D)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

SARs payable in cash are considered liability awards and the total amount of compensation is not known for certain until the date the SAR is exercised. The liability is adjusted each period to reflect any changes in the fair value of the award. Option A is incorrect because changes in estimated total compensation are reflected in the current period as an adjustment to compensation expense. Option C is incorrect as the liability should be adjusted each period to reflect changes in the fair value of the award, not just for each additional year of service. Option D is incorrect as one of the answer choices is correct.

Which of the Following Statements Is True Regarding Share Appreciation