What is the most important accounting objective for equity classified awards?

Question

Quizplus · Accepted Answer

The correct amount of compensation expense during the service period is the most important accounting objective for equity classified awards. This is because equity classified awards are considered to be a form of employee compensation, and companies are required to recognize the cost of this compensation in their financial statements. This cost is recognized over the service period, which is the time period during which the employee is required to render service in order to become entitled to the award. Measuring the fair value of the awards for balance sheet purposes and disclosing increases and decreases in their value are important as well, but determining the correct amount of compensation expense during the service period is the most critical objective. The change in the number of stock options that will eventually be exercised is not an accounting objective, as it is simply an outcome of the exercise behavior of the award recipients.

What Is the Most Important Accounting Objective for Equity Classified