The most important accounting objective for executive stock options is:
A)Measuring and reporting the amount of compensation expense during the service period.
B)Measuring their fair value for balance sheet purposes.
C)To disclose increases or decreases in the stock options held at the end of each accounting period.
D)None of these is correct.

Question

Quizplus · Accepted Answer

The most important accounting objective for executive stock options is to measure and report the amount of compensation expense during the service period. This is because executive stock options are a form of employee compensation and therefore the cost of the options must be recorded as an expense in the accounting period in which they are earned. The measurement and reporting of this expense is crucial for financial reporting purposes and for making informed business decisions. The other options, measuring fair value for balance sheet purposes and disclosing changes in stock options held, are important but not as critical as measuring and reporting compensation expense.

The Most Important Accounting Objective for Executive Stock Options Is