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 are correct.

Question

Quizplus · Accepted Answer

SAR payable in cash are a form of compensation where employees receive cash payments based on the increase in the value of a company's stock. The total amount of compensation is not known for certain until the date the SAR is exercised because the amount of increase in the stock price is not known in advance. Therefore, option B is the correct choice. Option A is incorrect because any change in estimated total compensation is recorded as a current period adjustment, not a prior adjustment. Option C is incorrect because the liability is adjusted based on the estimated increase in the value of the stock, not based on additional years of service.

Which of the Following Statements Is True Regarding Share Appreciation