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

Question

Quizplus · Accepted Answer

For nonqualified stock options (NQOs), the correct treatment is to recognize an expense for their value over the vesting period for financial reporting purposes, and for tax purposes, the employer can deduct the bargain element at the time of exercise.

Which of the Following Describes the Correct Treatment of the Exercise