This year, Nilo Inc. granted nonqualified stock options to 230 employees. For financial statement purposes, Nilo recorded a $179,200 expense for the estimated value of the options. As a result of this transaction, Nilo has a:

Question

Quizplus · Accepted Answer

The recording of a $179,200 expense for the estimated value of the nonqualified stock options creates a temporary unfavorable book/tax difference because the expense is deductible for tax purposes in a later year when the options are exercised or forfeited, while it is recorded as an expense in the current year for financial statement purposes.

This Year, Nilo Inc