Which of the following describes the correct treatment of nonqualified stock options (NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?
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

Before ASC 718, companies did not recognize an expense for NQOs in financial statements, but they could deduct the bargain element (difference between market price and exercise price) for tax purposes when the options were exercised.

Which of the Following Describes the Correct Treatment of Nonqualified