Lesson: Compensatory Stock Options

In this lesson, Nick Palazzolo, CPA, takes a deep dive into the valuation and accounting implications of compensatory stock options. He breaks down the crucial terms to understand, such as fair value of options, vesting periods, exercise prices, and the grant date, while providing relatable examples to illustrate these concepts. By discussing how the value of stock options is determined and recognized in financial statements, Nick helps demystify complex valuation models like the Black Scholes method. Additionally, he examines real-world scenarios, like options expiring worthless and the implications for employee compensation expense recognition over the service period, ensuring these concepts are firmly grasped. This robust exploration of stock options will solidify your understanding of how they impact both the employee's and the company's financials.