ACC 232 Financial Accounting Research Assignment Instructions

Your solution to all Financial Accounting Research assignments should be prepared as described below. Your report will have four distinct parts.

1. The first part of your report is the Question. In this section, you must identify the accounting problem. Be brief and precise. Try to write your question in one sentence. This section should not exceed two sentences.

2. The second part of your report is the Solution. In this section, you must clearly communicate your proposed solution to the accounting problem you identified in section one. Explain and lay out the steps involved in your solution. This will usually involve calculations and journal entries. Be sure to adequately answer the question from part one, including calculations and working. Your solution should be clear and understandable such that the reader does not have to read the authoritative literature for himself/herself. Please use in-text citations!

3. The third part of your report is the Authoritative Citation(s). In this section, you must indicate the exact citation(s) from the professional accounting literature upon which you based your solution.

These three parts of your typed research report should be about 1-1.5 single-spaced page in length.

4. In addition to the research report described above, ATTACH FULL DETAILS OF YOUR AUTHORITATIVE CITATION(S) TO YOUR REPORT.

Accounting for Share Units

Baltic Limited is a listed company based in California. On January 1, 2019, the company granted 10,000 share units to its vice president. Each share unit has a contractual service period of five years and a vesting condition based on market performance.

Each share unit is convertible into ordinary shares of Baltic Limited as follows:

• If the companys share price increases by more than the Nasdaq Composite index over the five years, each share unit converts into 5 shares.
• If the companys share price increases by less than or equal to the Nasdaq Composite index over the five years, each share unit converts into 1 share.

On the grant date, the companys ordinary shares have a fair value of $10 per share.

Management believes the probability of the above scenarios occurring are 40% and 60%, and uses this information to calculate the fair value of the share unit award.

The companys accountant has asked for your help to calculate compensation costs for these share units so that the appropriate journal entry can be recorded in 2019.

Ignore the effects of taxes.