Question: What is the accounting objective which best relates to the expensing the cost of employee stock options?

a. Accurate Presentation

b. Income Smoothing

c. Conservatism

d. Profit Maximization

Answer:

c) Conservatism. The fact is that employee stock options are valuable and thus represent a cost to the company. It can't be a) because the cost of employee stock options is only estimable and can't be gauged exactly.

Conservatism