The following questions dealing with share-based compensation and earnings per share are adapted from questions that previously appeared on Certified Management Accountant (CMA) examinations. The CMA designation sponsored by the Institute of Management Accountants (www.imanet.org) provides members with an objective measure of knowledge and competence in the field of management accounting. Determine the response that best completes the statements or questions.
1. Noncompensatory stock option plans have all of the following characteristics except
a. Participation by substantially all full-time employees who meet limited employment qualifications.
b. Equal offers of stock to all eligible employees.
c. A limited amount of time permitted to exercise the option.
d. A provision related to the achievement of certain performance criteria.
2. A stock option plan may or may not be intended to compensate employees for their work. The compensation expense for compensatory stock option plans should be recognized in the periods the
a. Employees become eligible to exercise the options.
b. Employees perform services.
c. Stock is issued.
d. Options are granted.