To account for stock appreciation rights,a company records compensation expense and a related liability.

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Stock appreciation rights represent a form of compensation to employees, and as such, companies need to recognize the fair value of these instruments as an expense in their income statement. This expense is usually recognized over the period that the employees provide services in exchange for the rights. Additionally, companies need to create a liability account to reflect their obligation to pay the employees once the stock appreciation rights are exercised.

To Account for Stock Appreciation Rights,a Company Records Compensation Expense