Occupy Mall Street: A Case Study

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Statement of Facts Occupy Mall Street (OMS) is a real estate management firm that manages shopping malls. In 2009 they went public and experienced an increasing stock price through 2011. Because of their success, OMS decided to begin granting annual stock option awards to the executives at the beginning of each year. On January 1, 2012, OMS granted 1,000 employee share options that cliff-vest after 4 years. The share options have a $30 exercise price and a $15 grant-date-fair-value. For the third and fourth years of service, OMS will modify the exercise price to $20 per share. The fair-value of these awards was $12 after modification and $9 before the modification. After assuming the previously mentioned facts, additional information about OMS is given. We are to assume that OMS includes a performance obligation in the terms of the award. Unfortunately, because of the loss of several tenants, on December 31, 2013 management concluded that the performance obligation has become improbable to achieve, and consequently they reduced the performance obligation. After considering the above stated facts, we are given another scenario. With the previously mentioned modification, OMS also loses another tenant which has a detrimental effect on their financials. Even though Occupy Mall Street modified their terms,…show more content…
How much cumulative compensation cost would be recognized through December 31, 2015, and December 31, 2016? Based on ASC 718-10-25-20, we would not accrue any compensation costs for an award with a performance condition that is not probable. So the cumulative compensation cost for both December 31, 2015 and December 31, 2016 would be $3,750. Looking forward, if the requisite service is not rendered, we would reverse the previously recognized compensation cost based on ASC

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