Question: A share-based compensation plan is a compensation arrangement in which employees receive share options, shares of stock, or cash payments based on the change in

A share-based compensation plan is a compensation arrangement in which employees receive share options, shares of stock, or cash payments based on the change in stock price instead of cash bonus. The accounting objective of share-based compensation plans is to recognize compensation expense over the periods in which the employees perform a service and earn the share-based award. A compensatory share option plan is intended to provide additional compensation to selected employees within the corporation by awarding them options to purchase the companys stock. GAAP deals with many different types of share-based compensation plans. For example, share option plans can either be fixed (where all the terms are fixed on the date of grant) or performance-based (where the number of options to be earned or the exercise price varies). In addition, some share-based plans provide compensation based on share appreciation while others offer restricted shares. Not only will a corporation have to record and report these particular transactions as appropriate, but they must also disclose several items of information about its share-based compensation plans. One of these items is a description of the plans, including the general terms, and the potential effect of the plans on shareholders. This information should include service period, number of shares authorized for grants of options, and maximum term of options granted. Information should also be included about the number and weighted average exercise prices for share-based compensation granted, vested, expired, and forfeited during the year.

What else is required to be disclosed?

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