Accounting problem?

Question

Hey guys I need help with that case, can't figure out waht's wrong with it.

Yergler Jewelry Manufacturing offers its employees a nonqualified stock option plan in which employees can purchase shares of stock for a discount from the current market price. The amount of the discount is equal to the number of years the employee has worked for Yergler times 0.25%. A worker with tens years at Yergler would get a discount of 2.5% while a worker with forty years would get 10%. Yergler the recognition of the expense and amortizes it over the lesser of the expected remaining period it will employ the employee or ten years.

Thanks.

Answer 1

The problem is in the expensing period. Nonqualified stocks plans have to be recognized when the liability exists. For example, the amortization typically matches the vesting period rather than an estimated employment period. If there is no vesting period, then it is expensed in the period granted.