How should stock options be accounted for under IASB standard on stock options (IFRS 2)?
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

Under IFRS 2, stock options should be accounted for by recording a compensation expense based on the value of the options expected to vest as of the date the options are granted. This requires estimating the fair value of the options using an appropriate valuation model and taking into account factors such as the expected term, exercise price, volatility, and interest rates. The expense is recorded over the vesting period of the options, and any changes in the estimated fair value are adjusted accordingly. Thus, option values are recorded on the balance sheet as an asset and as an expense on the income statement.

How Should Stock Options Be Accounted for Under IASB Standard