Interpreting Disclosure on Share-Based Compensation: P8-58. (LO1) Interpreting D

Question

Interpreting Disclosure on Share-Based Compensation:

P8-58. (LO1) Interpreting Disclosure on Share-Based Compensation Intel reported the following information in its 2012 10-K related to its restricted stock plan Intel Corporation INTC) Information with respect to outstanding restricted stock unit (RSU) activity is as follows: Number of RSUs Weighted Average Grant- Date Fair Value (In Millions, Except Per RSU Amounts) December 26, 2009 Granted. Vested. Forfeited S17.03 $22.56 $17.70 $17.98 105.4 32.4 (34.6) (3.4) 99.8 43.3 .5.8 (37.5) 4.4) $18.56 $19.86 $20.80 $18.60 $19.07 December 25, 2010 Granted Vested Forfeited December 31, 2011 Granted. Vested. Forfeited.. December 29, 2012 107.0 49.9 (43.2) S19.18 $25.32 $18.88 $20.93 (4.4) 109.3 $22.03 Expected to vest as of December 29, 2012 103.5 $20.21

Explanation / Answer

Ans a Stock Options are the right to buy a specific number of shares in the future at grant price. In general, options vest three years from the date of the grant, and option holders have an additional seven years from the vesting date to exercise them. Options have value if the stock price rises above the grant price, but could have no value if the stock price is at, or below, the grant price. They are taxed as income at the time of exercise, of option and taxes on gains to be paid upon subsequent sale of shares

Restricted Stock Units are a grant of units, once vested, equal to a share of stock. Company stock is not issued at the time of the grant. When RSUs vest, you will receive one share of company stock for each RSU that vests. It will always have value, whether the stock price goes up or down. The value of your award will increase if the price goes up and decrease if it goes down. RSUs are generally taxed when they vest

Ans b: In restricted stock option, the employer promises to pay you with shares or the cash value of the shares if you meet certain conditions, often including a vesting period with the company. Companies, particularly start-ups, offer executives a percentage of their salaries in RSU, as an incentive for increasing the company's stock value. They also come with a required holding time, and often you must meet certain performance goals. So it is linked with performance of the employess which also include their commitment with the company.

So because of the above reasons vesting period is important.

Ans c No of RSU= 109.3

Common stock Cr 109.3*.1= $10.93

The difference in AIPC = Fair value=22.03/109.3=.2

So in AIPC= 109.3 RSU*(.2-.1)=$10.93

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.