Accounting for stock options is the official process of registering, tracking and disclosing awards of employee stock options to ensure compliance with financial reporting standards. It involves accurately logging each step in the lifecycle of a stock option–from when it’s granted by directors or corporate officers, to when it’s exercised, vested and potentially cashed out. In order to keep accurate records and avoid potential penalties, companies must track stock options and related activities according to Generally Accepted Accounting Principles (GAAP) guidelines. And that’s where accounting for stock options comes in – helping businesses ensure their books are up-to-date and accurate every step of the way.