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 is correct.

Question

Quizplus · Accepted Answer

SARs payable in cash entitle employees to receive cash equal to the appreciation in the company's stock price over a predetermined period of time. The total amount of compensation payable to the employee is not known for certain until the date the SAR is exercised, as it depends on the stock price on that date. A is incorrect because any change in estimated total compensation is recorded as a current adjustment, not a prior adjustment. C is incorrect because the liability is adjusted annually based on changes in the company's stock price, not each additional year of service.

Which of the Following Statements Is True Regarding Share Appreciation