Accounting for Stock Options

Stock options are a form of compensation granted to an employee, by an employer, in lieu of salary and wages. Stock options grant employees the right to purchase a certain number of shares at a given price . Traditionally, firms have compensated their employees through some combination of salaries, commissions, or bonuses. Less prevalent was compensation tied to firm's performance, such as stock and/or stock options. Historically, performance-based compensation was designed for corporate executives and officers of the firm. …