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What is the meaning of fair value model?


Rakesh Shah

Rakesh Shah

CA Final

5K+

20-May-22 09:43

177

Answers (2)

In this model you calculate the employee compensation expense on the basis of fair value of option instead of intrinsic value. In case of fair value model, the fair value of option will be provided in the question.


Pratik Badade

Pratik Badade

CA Final

2K+

20-May-22 09:49

The fair value of an ESOP is calculated using an option-pricing model like, the Black-Scholes or a binomial model. For performing fair valuation of ESOPs, the Black-Scholes model is mostly preferred as it takes into account the various factors like Time Value, Interest Rate, Volatility, Dividend yield etc. For this instead of intrinsic value we consider the fair value given in the question.


shalu Muthukumar

shalu Muthukumar

CA Final

1K+

20-May-22 17:01

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