Real World Case 19–5 Share-based plans; Walmart Real World Financials Walmart of
ID: 2550943 • Letter: R
Question
Real World Case 19–5 Share-based plans; Walmart Real World Financials Walmart offers its employees a variety of share-based compensation plans including stock options, performance share awards, restricted stock, and restricted stock units. The following is an excerpt from a disclosure note from Walmart’s 2015 financial statements: Share-Based Compensation The Company has awarded share-based compensation to associates and nonemployee directors of the Company. The compensation expense recognized for all plans was $448 million, $462 million and $388 million for fiscal 2016, 2015 and 2014, respectively. Share-based compensation expense is included in operating, selling, general and administrative expenses in the Company’s Consolidated Statements of Income. The total income tax benefit recognized for share-based compensation was $151 million, $173 million and $145 million for fiscal 2016, 2015 and 2014, respectively. The following table summarizes the Company’s share-based compensation expense by award type: Fiscal Years Ended January 31, ($ in millions) 2016 2015 2014 Restricted stock and performance share units $ 134 $ 157 $ 141 Restricted stock units 292 277 224 Other 22 28 23 Share-based compensation expense $ 448 $ 462 $ 388 Required: 1. Walmart’s share-based compensation includes stock options, restricted stock units, restricted stock awards, and performance-based awards. What is the general financial reporting objective when recording compensation expense for these forms of compensation? 2. Walmart reported share-based expense of $448 million in 2015. Without referring to specific numbers and ignoring other forms of share-based compensation, describe how this amount reflects the value of stock options.
Explanation / Answer
1. Financing objectives when recording compensation expense are the following:
a. To determine the fair value of the compensation.
b. To expense the compensation over the periods in which participants perform the services.
I don't know the answer of second part but will surely get back to you. For the time being i am posting first part only due to time constraint.
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