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Compensations

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Compensation
1/ How much compensation cost should OMS recognize in each year of the award’s service period? FASB ASC718-10-30-2 states: “A share-based payment transaction with employees shall be measured based on the fair value.” Therefore, OMS calculated the total compensation expense bases on fair value of $15 on grant date, and OMS recognized compensation expense of $3,750 (1,000*$15/4=$3,750) at each end of 2012 and 2013.
The journal entry for each of the two years will read as followed:
Compensation cost 3,750 Share-based compensation liability 3,750
FASB ASC 718-20-35-3 states: “A modification of the terms or conditions of an equity award shall be treated as an exchange of the original award for a new award…The effects of a modification shall be measured as follows: a. incremental cost is measure as the excess of the fair value of the modified award immediately before its terms are modified… b. thus the total compensation cost measured at the date of a modification shall be the sum of the following: 1. The portion of the grant-date fair value of the original award for which the requisite service is expected to be rendered (or has already been rendered) at that date. 2. The incremental cost resulting from the modification. “Therefore, incremental cost portion is calculated as ($12-$9)*1,000/2, which is $1,500. Therefore, OMS should recognize compensation expense of $5,250 ($3,750+$1,500=$5,250) at each end of 2014 and...

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