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Basic Question 5 of 14
Which of the statement(s) is (are) true?
II. Companies electing the intrinsic-value-based method prescribed by APB 25 are required by SFAS 123 to report in the notes to their financial statements pro-forma net earnings and earnings per share calculations assuming the options had been expensed.
III. Options with zero intrinsic value at issue have zero fair value and should not give rise to expense recognition.
I. Under the intrinsic-value-based method prescribed by APB 25, options generally do not result in a charge to earnings.
II. Companies electing the intrinsic-value-based method prescribed by APB 25 are required by SFAS 123 to report in the notes to their financial statements pro-forma net earnings and earnings per share calculations assuming the options had been expensed.
III. Options with zero intrinsic value at issue have zero fair value and should not give rise to expense recognition.
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Learning Outcome Statements
explain issues associated with accounting for share-based compensation;
explain how accounting for stock grants and stock options affects financial statements, and the importance of companies' assumptions in valuing these grants and options.
CFA® 2025 Level II Curriculum, Volume 2, Module 11.