Q1) SAS Co. granted on million employee stock options on June 30, 2006. Each option permitted holder to purchase one share of SAS common stock at $6, 00 per share, which was also stock's selling price at that date. Options can be exercised any time after June 30, 2007.
Company used Black Scholes option pricing model to evaluate fair value of options at grant date. That amount was $2 million. Suppose service period in one year, SAS has a 12/31 year-end, and its tax rate is 40%.
a) Under FAS 123R, how would this transaction be reported in SAS's 12/31/09 year-end financial statements( Balance sheet, Income statement, Cash flow statement)
b) Suppose that 20 % of options were terminated in January 2007 as certain employees had very recently left company, Under FASB 123R, would these terminated options result in some sort of adjustment? If there is adjustment, make suitable entry or entries?