The Accounting for Employee Stock Options Involves

question 175

Multiple Choice

The accounting for employee stock options involves

• A)the measurement of the fair value of stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected market price volatility of the stock, the expected dividends, and the risk-free interest rate.
• B)calculating total compensation cost as the number of options the firm expects to vest times the fair value per option.
• C)factoring in the firms use of their historical experience on forfeitures due to employees terminating employment prior to vesting to estimate the expected number of options that will vest.
• D)amortizing the fair value of the stock options on the date of the grant over the requisite service period, which is the expected period of benefit.
• E)all of the above

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Definitions:

Aggregate

A total or sum, often used in contexts involving the collection of different items or amounts into a single whole.

Contracts

Legally binding agreements between two or more parties that are enforceable by law.

Economic Purpose

The underlying financial or economic reasons behind business transactions, investments, or policy decisions.

Dissolution

refers to the process of legally dissolving a company or partnership, ending its existence and distributing its assets.