Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) that were granted when ASC 718 applies?
A) Financial-expense value over vesting period; tax-no deduction.
B) Financial-expense value over vesting period; tax-deduct bargain element at exercise.
C) Financial-no expense; tax-deduct bargain element at exercise.
D) Financial-no expense; tax-no deduction.

Question

Quizplus · Accepted Answer

Under ASC 718, the correct treatment of the exercise of nonqualified stock options (NQOs) is to expense the value of the options over their vesting period and tax-deduct the bargain element (the difference between the exercise price and the market value of the stock at the time of exercise) at exercise. This results in a financial expense over time and a tax deductible expense at exercise.

Which of the Following Describes the Correct Treatment of the Exercise