On January 1, 2012, the Board of Washington Corporation issued 1,000 stock appreciation rights (SARs) to the 10 most senior officers of management. The SARs vest over two years and can be exercised at December 31, 2013. Each SAR can be exchanged for 10 shares of common stock or can be settled in cash for the difference in the price of the common stock between January 1, 2012 and December 31, 2013. The cash settlement is at the option of the Board.

Part I: How should the SARs be treated for EPS purposes, assuming the Board intends to issue shares? Would this create any incremental shares for diluted EPS purposes? Answer according to both US GAAP and IFRS. Please show work in answering the question.

Part II: How should the SARs be treated if the Board intends to settle the grants in cash at December 31, 2013? Answer according to both US GAAP and IFRS. Please show work in answering the question.