ACCA Advanced Taxation (ATX) Practice Exam

What is the exercise period for a CSOP scheme?

1. 1 to 5 years

2. 3 to 10 years

3. 5 to 7 years

4. 10 to 15 years

The correct answer is: 3 to 10 years

The exercise period for a Company Share Option Plan (CSOP) scheme is typically set within the range of three to ten years from the date the option is granted. This allows employees a substantial amount of time to exercise their options, providing flexibility as they decide when to purchase shares at the predetermined price. The CSOP is designed to incentivize employees by allowing them to acquire shares at a favorable price, encouraging them to contribute to the long-term success of the company. The ability to exercise options within a window of three to ten years aligns with the strategic goal of aligning employee interests with those of the company and its shareholders. Other ranges presented in the incorrect options do not align with the established guidelines for CSOPs. A range of one to five years might be too short for effective employee engagement, while the five to seven years option narrows the flexibility required for longer-term investment. A ten to fifteen-year period exceeds the typical duration set for CSOPs, thereby not conforming to standard practices. Hence, the correct answer reflects the regulatory framework governing CSOPs accurately.