Quiz 19.01 – T/F GAAP’s Requirement for Employee Stock Options Accounting
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
Using intrinsic value accounting for employee stock options is a requirement under GAAP.
Using intrinsic value accounting for employee stock options is a requirement under GAAP.
It is necessary to adjust compensation expense during the service period to reflect changes in the fair value of options caused by changes in the market price of the underlying shares.
It is necessary to adjust the fair value estimate of stock options on the grant date if prior experience indicates that a material number of options will be forfeited before vesting.
When a company issues stock dividends and splits in the current year, it is necessary to retrospectively restate the earnings per share (EPS) for all prior years presented in comparative financial statements.
When computing diluted earnings per share (EPS), the inclusion of dilutive convertible bonds impacts both the numerator and the denominator.
In computing earnings per share (EPS), the dilutive effect of convertible preferred stock, EXCEPT for tax considerations, is generally handled in a similar way as convertible debt.
The inclusion of convertible bonds in a company’s capital structure may decrease diluted earnings per share (EPS), even if the bonds are not converted during the year.
Stock options are considered dilutive and are included in the calculation of diluted earnings per share (EPS) when the exercise price is higher than the average market value of the stock.
The computation of basic earnings per share (EPS) does NOT require any time-weighting adjustment for contingently issuable shares.
When a company reports discontinued operations in its financial statements, it is necessary to disclose earnings per share (EPS) for both income from continuing operations and net income.