Executive stock options should be reported as compensation expense:A. Using the intrinsic value method.B. Using the fair value m

Question

MA_775_DIABLO [31]

3 years ago

8

Executive stock options should be reported as compensation expense:A. Using the intrinsic value method.B. Using the fair value m

ethod.C. Using either the fair value method or the intrinsic value method.D. Only on rare occasions.

Business

1 answer:

shepuryov [24] · Answer 1 · 2022-06-19T23:38:52+03:00

Answer: .B. Using the fair value method

Explanation: Executive stock options (ESO) are documents that permits certain number of shares in a company's stock to be purchased at an approved strike price within a given time. This is a type of stock option is offered to company's executive and members of its management as a form of incentive and reward system.

The incentive is not made compulsory for company executive to use, but the company must respect the contract if a company's executive decides to use it.

Forms of Executive Stock Options.

• Non qualified stock Option: This is a type of executive stock option that does not allow for long term capital tax rate.

•Incentive stock option: A type of ESO in which capital gain tax rates are allowed but only under certain rules and conditions which must be followed and adhered to.