Occupy Mall Street (OMS or the “Company”) is a leading real estate management firm that owns and manages over 100 shopping malls across the United States. The Company went public in 2009 and experienced a continued increase in stock price through 2011. With the sustained growth of the business and rising stock price, OMS developed a practice of granting annual stock option awards to its executives at the beginning of each year. On January 1, 2012, OMS granted 1,000 employee share options that cliff vest after a four-year service period, with an exercise price of $40 per share. Using the Black-Scholes pricing model, the Company determined that the grant-date fair-value-based measure of the awards was $20. On the grant date, the Company’s stock was trading at $40 per share. On January 1, 2014, to provide additional retention incentive to its employees for the third and fourth years of service of the 2012 annual grant, OMS will change the terms of the award by modifying the exercise price to $25 per share. Using the Black-Scholes pricing model, management determined that the fair-value-based measure of the awards was $26 after modification and $16 before the terms of the award were modified. The modification did not affect any of the other terms or conditions of the awards. Note that no forfeitures are assumed for the purposes of this case. Required: When answering each of the questions in this case (1 through 5), cite the relevant ASC to support your answers. 1. How much compensation cost should OMS recognize in each year of the award’s service period? 2. How would the accounting for these awards change if the modification to the terms (i.e., exercise price) of the award was made on January 1, 2017, after the awards have become fully vested?