If Previous Experience Indicates That a Material Number of Stock

question 222

True/False

If previous experience indicates that a material number of stock options will be forfeited before they vest, the fair value estimate of the options on the grant date should be adjusted to reflect that expectation.

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Definitions:

Allowance Method

An accounting technique that estimates and anticipates uncollectible accounts receivable and bad debts by establishing an allowance for doubtful accounts.

Bad Debts Expense

An expense recognized on a company’s income statement, representing the amount of accounts receivable that is not expected to be collected due to customers' inability to fulfill financial obligations.

Uncollectibles

Accounts receivable that a company has determined are unlikely to be collected and writes off as a bad debt expense.

Allowance Method

An accounting technique that anticipates and adjusts for potential future bad debts or credit losses.