Company A gives its employees stock options on Day $1,$ Year $1.$ It follows GAAP, and records a related expense of $$500,000$ over the life of the options. However, because Company A$\text{'}$s stock price is depressed, no employee ever exercises the options. They expire unused. What is the proper accounting for Company A when the options expire?

$$ It needs to restate the prior years' income, to reverse the $$500,000$ in recorded expenses

It does not restate prior years' income, but shows a $$500,000$ positive item in current year income to reflect the expiration of the options

It neither restates prior years, nor shows a positive item in current year income.