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If, however, the option exercise prices are later challenged by the IRS, then the company will have to satisfy the burden of proving that its stock valuation method was reasonable and was reasonably applied, as required under the General Rule. But deferring recognition of stock option expense flies in the face of both accounting principles and economic reality. Under the rules applicable to ISOs, if an option would fail to be an ISO solely because the exercise price was lowest spreads in forex than the fair market value of the underlying stock as of the date of grant, generally the option is treated as an ISO if the company attempted in good faith to set the exercise price at fair market value.