Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Question

Quizplus · Accepted Answer

This is because book expenses for stock options are recognized based on the fair value of the options at the grant date, whereas tax expenses are recognized based on the intrinsic value of the options (i.e. the difference between the stock price and the exercise price) at the exercise date. Since the stock price may increase between the grant date and the exercise date, the book expense can be higher than the tax expense.

Employer's Expense for Stock Options Is Typically Recognized Earlier for Book