For a compensatory share option plan, any compensation cost related to the plan must be recognized over the service period. The underlying financial accounting concept that supports this approach is
A) revenue recognition.
B) matching.
C) conservatism.
D) historical cost.

Question

Quizplus · Accepted Answer

The matching principle in accounting dictates that expenses should be recorded in the same period as the revenues they help to generate. In the context of a compensatory share option plan, the compensation cost is recognized over the service period because it is during this period that employees are rendering their services, which contribute to generating revenue for the company. Hence, recognizing the compensation cost over the service period matches the expense with the revenues generated, adhering to the matching principle.

For a Compensatory Share Option Plan, Any Compensation Cost Related