The IASB standard on stock options (IFRS 2)is substantially the same as U.S.GAAP. How should stock options be accounted for?
A)Since their value is not determinable until a future date,they are not recorded,but only disclosed in the notes to the financial statements.
B)A compensation expense is recorded based on the value of the options expected to vest as of the date the options are granted.
C)An expense is recorded only if a market value for the options exists on the date the options are granted.
D)The options are recorded as a liability for the value of the stock at the exercise date.

Question

Quizplus · Accepted Answer

Both IFRS 2 and U.S. GAAP require that companies record a compensation expense associated with stock options based on the estimated fair value of the options expected to vest as of the date the options are granted. Therefore, choice B is the correct answer. Choice A is incorrect because disclosure in the notes without recognition in the financial statements does not satisfy the requirements of either IFRS 2 or U.S. GAAP. Choice C is incorrect because even if a market value does not exist, the fair value of the options must still be estimated for accounting purposes. Choice D is incorrect because the options are not recorded as a liability but rather as an equity-based compensation expense.

The IASB Standard on Stock Options (IFRS 2)is Substantially the Same