A stock option plan will be defined as compensatory if it has which one of the following characteristics?
A)The discount from market price for the stock option is greater than either what would be reasonable in an offer of stock to stockholders or others or the per-share amount of issuance costs avoided by not issuing the stock to the public.
B)Employees have 31 days or less from the date the purchase price is set to decide whether or not to enroll in the plan.
C)Almost all full-time employees are able to participate in the plan.
D)The purchase price is based solely on the market price of the stock on the purchase date.

Question

Quizplus · Accepted Answer

A stock option plan is defined as compensatory if the discount from market price for the stock option is greater than what would be reasonable in an offer of stock to stockholders or others, or the per-share amount of issuance costs avoided by not issuing the stock to the public. This means that the stock option is being used as a form of compensation, rather than just a means of issuing stock. Option plans that meet this criteria are subject to specific accounting and financial reporting requirements. Options that do not meet this criteria are considered non-compensatory and are subject to different accounting and financial reporting requirements. Options that are fully taxable to the employee on grant are considered non-compensatory.

A Stock Option Plan Will Be Defined as Compensatory If