When employees are granted options as part of a compensatory stock option plan,
A) Total compensation is measured using a fair value method.
B) Total compensation is measured using the intrinsic method.
C) Total compensation is measured when the options are in the money.
D) Total compensation is measured using the difference between the strike price and the fair value of the options on the grant date.

Question

Quizplus · Accepted Answer

When employees are granted options as part of a compensatory stock option plan, total compensation is measured using a fair value method. This means that the value of the options at grant date is determined using a standard valuation method, such as the Black-Scholes model, and this fair value is recognized as an expense over the vesting period of the options.

When Employees Are Granted Options as Part of a Compensatory