Accounting Changes and Error Corrections

Stock compensation is tested with one question type almost exclusively: how much compensation expense to recognize in a given period. The formula is straightforward — grant date fair value divided by vesting period — but AICPA complicates it with cliff vs. graded vesting and forfeitures. The trap: candidates who use intrinsic value instead of grant date fair value get this wrong. Under GAAP, stock options are measured at grant date fair value, period.