Under U.S. GAAP, a deferred tax asset for stock options:
A) is created for the cumulative amount of the fair value of the options the company has recorded for compensation expense.
B) is the portion of the options' intrinsic value earned to date times the tax rate.
C) is the tax rate times the fair value of all the options.
D) isn't created if the award is "in the money;" that is, it has intrinsic value.

Question

Quizplus · Accepted Answer

Under U.S. GAAP, for stock options, a deferred tax asset (DTA) is created for the cumulative amount of the fair value of the options the company has recorded for compensation expense. The DTA is the tax rate times the amount of compensation. Under IFRS, the deferred tax asset isn't created until the award is "in the money;" that is, it has intrinsic value. When it is in the money, the addition to the DTA is the portion of the intrinsic value earned to date times the tax rate.

Under US GAAP, a Deferred Tax Asset for Stock Options