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Employee Stock Option Plan
Accountancy
In Study Material Illustration problems (Illustration no. 5 and 6), 2 different approaches are taken regarding recognizing the employee compensation expenses amount. In Ilst. 5, Amount of expense recognized for year 3 is based on the formula: Fair value of options(active options)/Total number of years. In Ilst. 6, Amount of expense recognized in year 2 is by formula: Fair value of options(active options) for proportionate period - cumulative Amount of expenses till previous year. Can I apply the 2nd approach for all situations or is it approach specific?
Answers (2)
CA Suraj Lakhotia Admin
You should follow cumulative approach. i.e. the second method.
Thank you very much Sir. ICAI itself has confused by giving 2 approaches. Thanks for this help.
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