Executive stock options should be reported as compensation expense:
A) Using the intrinsic value method.
B) Using the fair value method.
C) Using either the fair value method or the intrinsic value method.
D) Only on rare occasions.

Question

Quizplus · Accepted Answer

Executive stock options should be reported as compensation expense using the fair value method, which is the recommended method by the Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS). The fair value of the options should be estimated at the grant date and recognized as an expense over the vesting period. The intrinsic value method, which only takes into account the difference between the exercise price and the stock price at the grant date, is no longer allowed under US GAAP and IFRS.

Executive Stock Options Should Be Reported as Compensation Expense