Some managers argue that since employee stock options are usually issued at an exercise price that is less than or equal to market value when they are granted, they have no value. However, generally accepted accounting principles require that they be recorded as compensation expense. The primary reason for this is:
A) To achieve proper matching.
B) The time value in the options creates economic value.
C) The entity must use employee stock options in order to compete for talent.
D) They are accepted by employees as compensation.

Question

Quizplus · Accepted Answer

The time value in the options creates economic value, which is why they are recorded as compensation expense according to generally accepted accounting principles.

Some Managers Argue That Since Employee Stock Options Are Usually