Assigning Credit Where It’s Due

BY DON WIRTZ

The article “ Avoiding FASB 123(R) Pitfalls ” (May 07, page 74) was very informative. However, I wonder: In Exhibit 1, the very first journal entry, compensation expense is debited, but what is credited? Is it additional paid-in capital, or possibly “options outstanding”? If it is APIC, wouldn’t this be confused with the actual excess tax deductions that are eventually credited to APIC? Also, what happens to the original corresponding credit to the deferred income credit? I could just guess that it is used when the income tax is paid.

Option accounting is complex, and I am glad to see it related to net operating loss companies.

Don Wirtz, retired accountant
Lakewood, Ohio

Author’s reply: The credit entry that accompanies the debit to compensation expense is a credit to additional paid-in capital. For reference, see the article by Nancy Nichols and Luis Betancourt “Options and the Deferred Tax Bite” (March 06, page 71). Their article addresses your second question also.

David Randolph, CPA, Ph.D.
Dayton, Ohio

SPONSORED REPORT

Tax reform changes are now in effect

With all the recent tax law changes, this year it’s more important than ever to make sure your clients’ tax situations are squared away before year end. This report provides necessary guidance to ensure 2019 starts without a hitch.

PODCAST

Using drones to enhance audits

Hermann Sidhu, CPA, global assurance digital leader at EY, walks us through EY’s exciting new project to use drones to help audit large warehouses and outdoor inventories.