medium · Investment Banking accounting
Which of the following describes the impact of SBC on the Balance Sheet identity (Assets = Liabilities + Equity)?
- Equity decreases by the full SBC expense, since issuing new shares to employees dilutes existing shareholders' stakes.
- Total Assets increase by the SBC expense amount to reflect the value the employees are believed to provide.
- Total Liabilities increase because the company legally owes shares to its employees for the award.
- Total Assets are unchanged, Total Liabilities are unchanged, and the internal components of Equity shift.
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