In situations where an option-pricing model is required to be used to determine the fair value of equity instruments granted, the accounting standard, AASB 2 Share-based Payment:
A) requires the use of a binominal option-pricing model.
B) requires the use of the Black-Scholes-Merton formula.
C) allows the entity to choose the option-pricing model it wishes to use, but contains a number of factors that the option-pricing model selected must take into account as a minimum.
D) requires expected dividends to be taken into account when measuring the shares or options granted.

Question

Quizplus · Accepted Answer

AASB 2 Share-based Payment allows the entity to choose the option-pricing model it wishes to use, but contains a number of factors that the option-pricing model selected must take into account as a minimum. The standard does not prescribe a specific option-pricing model to be used. However, it does require expected dividends to be taken into account when measuring the shares or options granted.

In Situations Where an Option-Pricing Model Is Required to Be