Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs) that were granted when ASC 718 (a codification of FAS 123R) applies?

Question

Quizplus · Accepted Answer

When ASC 718 (FAS 123R) applies, the correct treatment of exercise of NQOs is that there is a financial expense value over the vesting period and for tax, the bargain element at exercise is tax-deductible. This is because NQOs are not  granted at market price, and as such, the bargain element at exercise represents additional compensation to the employee and thus a tax-deductible expense for the employer.

Which of the Following Describes the Correct Treatment of the Exercise