Question #3
Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based
PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf
Page: 1
Status: Correct
Correct Answer: A
Question
Which of the following is NOT an advantage of share based compensation over cash compensation?
Answer Choices:
A. Share based compensation does not require a cash outlay
B. Share based compensation serves to align employee interest with the interests of stockholders
Explanation
Share based compensation needs to be recognized at fair value under both U.S. GAAP and
IFRS. Intrinsic value does not matter. However, the expense does not require a cash outlay
and serves to align the interests of employees and stockholders.