Current GAAP Recommends That the Fair Value Method Be Used

question 5

Essay

Current GAAP recommends that the fair value method be used to account for compensatory stock option plans.From a conceptual point of view, this method is an improvement over the intrinsic value method.
Required:
Explain how the fair value method is an improvement over the intrinsic value method.

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Definitions:

Mammary Glands

Specialized organs in mammals that produce milk to nourish newborn offspring, consisting of lobular glands that are modified sweat glands.

Prolactin

A hormone produced by the pituitary gland that plays an important role in lactation, stimulating milk production in mammals.

Oxytocin

A hormone and neuropeptide involved in childbirth and lactation, also playing a role in social bonding and trust.

Muscle

A tissue in animal bodies composed of fibers that contract to produce movement or maintain the position of parts of the body.