Introduction:

Compensatory stock option plans are a common component of employee compensation packages, allowing employees to purchase company stock at a predetermined price. The financial accounting for such plans involves various considerations. Let's examine a set of statements related to compensatory stock option plans and identify which statement does not accurately reflect the financial accounting principles associated with these plans.

Question:

Which of the following statements regarding the financial accounting for compensatory stock option plans is not accurate?

Multiple Choice

A) Stock options' fair value is recognized as compensation expense over the vesting period.

B) The common stock issued upon the exercise of stock options is recorded at its fair market value.

C) Changes in the market value of stock options during the vesting period do not impact the recorded compensation expense.

D) The par value of common stock issued upon the conversion of options increases total owners' equity.