Which of the Following Was True About Employee Stock Options

question 6

Multiple Choice

Which of the following was true about employee stock options between 1996 and 2004?

• A) The options never had any affect on a company's financial statements
• B) The value of options which were at-the-money when issued had to be expensed on the income statement
• C) The value of options which were at-the-money when issued had to be reported in the notes to the financial statements
• D) Options which were at-the-money when issued did not affect a company's financial statements

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Definitions:

Futures Contract

An agreement to buy or sell an asset at a predetermined future date and price.

Clearinghouse

An intermediary entity between buyers and sellers in financial markets that ensures the orderly settlement of trades.

Offset

To counterbalance, compensate, or neutralize the effect of something by applying an opposing force or effect.

Futures Contract

A legally binding contract to acquire or dispose of a specific item at an agreed-upon price at a future date.