Final answer:
True, stock-based compensation plans can increase the risks related to accounting and disclosure requirements. The value of stock-based compensation can be influenced by various factors, leading to fluctuations in reported compensation expense. Changes in stock price can impact the company's financial performance.
Step-by-step explanation:
True. Stock-based compensation plans can indeed increase the inherent risks related to accounting and disclosure requirements. These plans involve granting employees or executives shares of stock or stock options as a form of compensation. This means that the company's financial statements must accurately reflect the value of the stock-based compensation, which requires careful accounting and disclosure.
Furthermore, the value of stock-based compensation can be influenced by various factors such as the company's stock price or market conditions. Changes in these factors can lead to fluctuations in the reported compensation expense, potentially affecting the company's financial performance. For example, if a company grants stock options to its employees at a high exercise price, and the stock price subsequently declines, the value of those options may decrease significantly. This could result in a higher compensation expense being recognized in future reporting periods, which may impact the company's profitability and financial position.