Which of the following statements regarding nonqualified stock options (NQOs)is false?
A)Book-tax differences associated with NQOs may be either permanent or temporary.
B)If the value of the options that vest is greater than the bargain element of options exercised, the book-tax difference for that year is unfavorable.
C)No expense recognition is required for NQOs for financial accounting purposes.
D)All stock option-related book-tax differences are temporary.

Question

Quizplus · Accepted Answer

The statement that no expense recognition is required for NQOs for financial accounting purposes is false. Under Financial Accounting Standards Board (FASB) rules, companies must recognize a compensation expense for the fair value of stock options granted to employees. This expense is recognized over the vesting period of the options, and the associated accounting entry reduces earnings before taxes (EBT) on the financial statements.

Which of the Following Statements Regarding Nonqualified Stock Options (NQOs)is