Murray Compensation Essay - 875 Words

Re: Murray Compensation, Inc. Facts Murray Compensation, Inc. (Murray), an SEC registrant that provides payroll processing and benefit administration services to other companies, granted 100,000 â€Å"at-the-money† employee share options on January 1, 2006. The awards have a grant-date fair value of $6, vest at the end of the third year of service (cliff-vesting), and have an exercise price of $21. Subsequent to the awards being granted, the stock price has fallen significantly. On January 1, 2008, Murray decreased the exercise price on the stock options to $12. This downward adjustment to the exercise price was made in order to ensure that the options continue to provide intended motivation benefit to employees. However, in addition†¦show more content†¦10 states that an entity shall account for compensation cost from share-based payment transactions with employees in accordance with the fair-value-based method. Under the fair-value-based method, the cost of services received from employees in exchange for awards of share-based compensation shall be measured based on the grant-date fair value of the equity instruments issued. A10-A17 discuss the acceptable methods of calculating fair value at the grant date. The grant-date fair value of the Murray options is $6. Following the guidance in Illustration 4(a), Share Options with Cliff Vesting, of FAS 123(R), compen sation expense for the years ended December 31, 2006 2007 is $200,000 per year (calculation attached hereto). However, at issue is the calculation of compensation expense for the years subsequent to the change in exercise price and vesting period. FAS 123(R) 51 states that 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. 51 further states that in substance, the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation expense for any incremental value. FAS 123(R) B182 states that in accounting for a modification of the terms of an award of employee share-based compensation, such transactions generally are transfers ofShow MoreRelatedHow Employees Can Be Motivated To Higher Levels Of Performance By Better Compensation Packages1732 Words   |  7 PagesAccording to history, the notion of compensation for work pre-dates to sometime between 10,000 BC and 1,000 BC during the Neolithic Revolution (Wikipedia). Back then, salt was used as payment till around 560 BC when coins came into circulation and money was invented (Wikipeida). Money became widely used as the payment for labour. 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