Stock options are commonly used to compensate employees and executives. U.S. GAAP requires that the value of the options must be amortized and recorded as an expense on the income statement over time. U.S. tax law generally disallows a tax deduction for this expense, and sometimes allows a tax deduction when the options are exercised. Whether an option is an incentive stock option (ISO) or a non-qualified stock option (NQSO) is important when determining the tax consequences of the exercise. The tax accounting for stock options is particularly complicated.